Prayers

The House met in a hybrid proceeding.

Arrangement of Business
 - Announcement

Lord Fowler: My Lords, the Hybrid Sitting of the House will now begin. Some Members are here in the Chamber, and others are participating remotely, but all Members will be treated equally.

Tributes: Baroness Williams of Crosby

Lord Newby: My Lords, I first met Shirley as a teenage student. I served with her on the Labour Committee for Europe. I was at her side as she chaired every session of every SDP conference. Latterly, I worked with her closely in the Lords where initially she was my leader and, more recently and improbably, I was hers. Over these 50 years, Shirley did not really change. She continued to be passionate about the things she believed in, principally social justice and Europe. She was always fearless in advocating these things and was prepared to take political hostility head-on to promote them.
Shirley had a long political career, which began as general secretary of the Fabian Society. She was MP for Hitchin and then Stevenage, and held a series of ministerial posts in the Wilson and Callaghan Governments, culminating in the position of Secretary of State for Education. In 1981 she left the Labour Party as one of the gang of four founder members of the SDP. Leaving the Labour Party was particularly hard for her because she remained popular within it, was an elected member of the National Executive Committee and could have expected further promotion, possibly even the leadership. But, having made the break, she never questioned her decision. She also quickly realised that good relations with and an eventual merger between the SDP and the Liberals was a political necessity. Her role in creating the Alliance and then the Liberal Democrats was crucial because she was able to build rapport and trust between parliamentarians and members of both parties.
Her victory in the Crosby by-election in November 1981 was critical in sustaining momentum for the SDP in its early months. Her eloquence, directness and popularity guaranteed her regular media appearances, which provided a vital part of the oxygen necessary for our future successes. Having lost Crosby in the 1983 general election, Shirley was nominated to the Lords by Paddy Ashdown in 1993. She combined many of her early years in your Lordships’ House with being professor of electoral politics at Harvard University. She took over from my noble friend Lord Rodgers of Quarry  Bank as leader of the Lib Dem group in 2001, a position she held for three years, and from 2004 until her retirement in 2016 she used the bully pulpit of this House to promote her principal causes, and, appropriately, used her final speech to argue for Britain’s continued place within the EU.
But Shirley was no ordinary politician. What set her apart from any other politician I have met was her empathy and charisma. She was genuinely interested in other people, their ideas and their lives. She had a special magnetic charm which meant that people warmed to her and were energised by her.
Two episodes summed this up for me, one personal and one political. In the early days of the SDP, Shirley invited my wife and I to stay overnight at her Hertfordshire house to break a journey up to Yorkshire. Our political discussions with fellow guests went on well into the night. She had all the enthusiasm of a student. But next morning, at 8 o’clock, a knock at our bedroom door heralded Shirley bringing us a cup of tea. It was impossible not to be infatuated.
In the 1981 Warrington by-election, Shirley took part in a cavalcade in support of Roy Jenkins. She stood on the front seat of the car, her head poking through an open sunroof. As the cavalcade progressed down the road in a council estate, we passed a man lying on his back underneath his car repairing it. On hearing Shirley’s voice through the loud-hailer, he looked up and beamed. “Hello Shirley”, he said, as if he had been expecting a visit from a dear friend. To generate that kind of warm response from strangers was as commonplace with Shirley as it is rare with the rest of us.
Shirley gained something of a reputation for disorganisation and was frequently late, but this was borne out of the mistaken belief that she could moderate the passage of time to allow her to fit in an impossibly large number of tasks to which she committed herself. She was immensely energetic and, in a crisis—of which I have seen a number with her—she demonstrated a steely nerve and a razor-sharp focus.
As one of the earliest female Cabinet Ministers, and a single mother, Shirley faced widespread prejudice, but this never embittered her. She simply got on with it. It did, however, make her particularly keen to support young women who wanted to go into politics, and to persuade them that this was an honourable calling—which she fervently believed it was. I know that many of my female colleagues in the Lords and Commons, as well as councillors and activists across the country, were inspired by Shirley to take up politics. This in itself is a powerful legacy.
More generally, in an era when politicians are widely distrusted, Shirley maintained popular affection. She was trusted and admired by millions. As I was writing this tribute, the phone rang on my office desk. The caller had never met Shirley, but had rung to express his condolences for someone he described as “a legend”. He was right: she was—and we will miss her.

Baroness Evans of Bowes Park: My Lords, I do not think that any of us were in any doubt about the impact that Baroness Williams had on our political life, or the huge affection so many  felt for her. But it brings it home to hear a close friend and colleague articulate them, as the noble Lord, Lord Newby, has just done so well.
Our paths crossed in this House for just a short time, so I did not have the privilege of learning first-hand from someone who has been described to me as one of the most talented speakers in this House. However, I did have the honour of winding up the debate when Baroness Williams made her valedictory speech in January 2016. As a relatively new Peer and Whip at the time, it was a nerve-racking occasion for me, but it gave me the opportunity, albeit briefly, to see some of her many qualities, which others will recall.
Of course, I was well aware of the impact that Baroness Williams had on the politics of this country. Our politics may have been different, but a passion for education and advocacy on behalf of women are areas of interest we shared. As we have heard from the noble Lord, she served as a Labour MP from 1964, and held various ministerial posts before landing her first Cabinet job in 1974 under Harold Wilson, and subsequently Jim Callaghan, culminating in her appointment as Secretary of State for Education and Science.
There is no doubt that Baroness Williams’s decision to leave the Labour Party and create the Social Democratic Party with the gang of four was one of the boldest moves in recent political history. Her by-election victory for the newly formed SDP in Crosby in 1981 was a great achievement for the fledgling party, overturning a 19,000 Conservative majority. By-elections are never easy, but her success showed what a formidable campaigner she was. Whether it was for her intellect, her wit, or her down-to-earth sincerity, it is not difficult to see why the voters of Crosby wanted her as their voice in Parliament. Although the SDP achieved record highs for a new party in the opinion polls, that was not translated into winning seats at the subsequent general election, so her time as a representative of the party in the other place was short-lived. However, as the noble Lord said, she was made a life Peer in 1993, and appointed Leader of the Liberal Democrats in the Lords in 2001.
Baroness Williams was often spoken of as a potential leader of her party and a future Prime Minister—for many, perhaps, the best we never had. What is clear is that she had a remarkable ability to communicate, whether on the stump, on television or in the House. When I asked colleagues on my Benches for their memories of her, many recalled her as one of the most fluent and formidable debaters. One said, “She was never with a note—spellbinding sometimes. She could hold the House in the palm of her hand.” Perhaps just as importantly, all agreed that she was gracious and courteous, even to those she fundamentally disagreed with. As the Prime Minister has recalled:
“Even when we disagreed—as we often did—she had the gift of sounding so completely reasonable at all times.”
Even when Baroness Williams was away from Parliament, she was making a lasting impact on policy and politics abroad. Her ideas were transported internationally when she became a professor at Harvard’s Kennedy School of government, where no doubt she planted the seeds of her brand of liberalism in a generation of students over the 13 years of her tenure.  She also left her mark in multiple countries when she assisted in drafting the constitutions of countries around the world.
What is clear is the respect she commanded, but also—as is not always the case—the huge affection, particularly in this House. Indeed, the esteem in which she was held was demonstrated when she was made a Companion of Honour for services to political and public life. We on these Benches send our best wishes and sincere condolences to her daughter, her family and all her friends and former colleagues. She was a remarkable woman. She will be much missed.

Baroness Smith of Basildon: My Lords, despite being made a life Peer in 1993, Baroness Williams of Crosby was nearly always publicly referred to as Shirley Williams—not in ignorance, but in affection. She was of that generation of multi-skilled intellectual politicians who could easily have taken a different path in life from politics. Perhaps if Elizabeth Taylor had not pipped her at the post for the lead human role in the 1944 film “National Velvet”, she might never have returned home to the UK and a life of public service. But, like many others of her generation, she managed to combine her other interests with a passion for politics, always believing in it as a force for good and a route to social, political and economic advances.
She proudly described herself as a feminist. Her grandmother had been a suffragist, and she said that her feminism was instilled in her by her mother, Vera Brittain, supported by her father. In a 2015 interview for the book 100 Leading Ladies, she recalled that until she became a teenager she had never encountered anything that made her feel inferior to her brother and simply took that for granted. Her feminism was a constant throughout her life, especially in her politics.
She was pretty dismissive at having been tipped, as a Labour Minister, to be the first female Prime Minister, saying that
“there were then … so few women in politics that if you were quite good at your job and were a good speaker, you were almost inevitably going to be tipped for the job”.
But the feminist in her also claimed that she had
“learnt that politicians, especially male ones, tend to overestimate their own capacities, and so I am careful not to overestimate mine”.
Instead, she described her character as “tremendously involved and energetic”. She felt that whatever you had to do, you had to “throw yourself into it”—and she certainly did.
Having been raised in a strongly political and intellectual home, she brought an academic rigour and energy to all she took on. She was the first woman to chair the Oxford University Labour Club, and her degree in PPE and Fulbright scholarship led to a career first in journalism and then as general secretary of the Fabian Society. She was radical, pragmatic, articulate and enthusiastic. As a Labour MP and Minister in the 1960s and 1970s, she would energise debates in the House of Commons and, in the days of well-attended public meetings, delight audiences around the country. She was a passionate supporter of European integration in the days when it was a divisive issue in the Labour Party.
In 1979 she earned the admiration of many as throughout the election campaign she travelled the country supporting colleagues in marginal seats. As many of us witnessed in this House, she was a naturally engaging, authentic speaker who drew in audiences. On the eve of poll, she was miles away from her own constituency, supporting one of the youngest members of the Government, Ann Taylor—now my noble friend Lady Taylor of Bolton—who was defending a majority of just 900. Although Ann was returned to Parliament, unfortunately Shirley lost her seat. Some attributed her defeat to the overly hostile press coverage of her visit to the Grunwick picket line to hear from those who were on strike.
However, she remained one of the country’s most popular characters and returned to Parliament, as we have heard, in the 1981 by-election, but this time as one of the leaders of the newly created SDP. Splits in political parties are painful for all and, while the Labour Party suffered as a result, the SDP never achieved the success that some predicted. I had not long been politically active, but I recall that time vividly. Whatever the views of individual Labour Party members, the loss they felt most sadly was that of Shirley, for whom they had enormous affection.
Despite those differences, the warmth of the tributes paid to Baroness Williams by her former colleagues is testimony to her character. She was always generous with her time and passionate about her beliefs. Her commitment to the issues she cared about never wavered. As a Member of your Lordships’ House and leader of the Liberal Democrats, she was a force to be reckoned with. She never stopped working and hoping for a better world. My colleague and noble friend Lady Royall—now principal of Somerville College, which Baroness Williams attended—said:
“She was a … feminist, a woman of great intellect who cared deeply and worked tirelessly to bring about greater social and economic justice … I never spent a moment in her company which I did not appreciate or enjoy.”
Shirley Williams lived a long, eventful and productive life. On behalf of these Benches, I send our condolences to her daughter, her family, her friends and her party.

Baroness Neuberger: My Lords, I too rise to pay tribute to Baroness Williams, whom I always knew as Shirley. Others have focused on her political career and I can certainly echo that, but I will pay particular tribute to her for two very distinct but sometimes closely interrelated qualities and achievements.
For me and many women of my generation, Shirley was a profound influence. She encouraged us in the 300 Group, formed to get 300 women into the House of Commons, and encouraged us as individuals. She did that by acknowledging the real problems that women often face in political life, particularly parliamentary life and particularly those trying to combine small children and a parliamentary career. She was very kind to lots of us. Indeed, my noble friend Lady Hayman has just asked me to record her kindness to her. She was kind to us all.
She was unfailingly supportive of women who wanted to make a difference, as she always described it, and she was unflinchingly honest about how hard it would be. I have particular reason to be grateful to her. I had  known her slightly as a child, but she was particularly kind to me as a student at Cambridge, as her marriage to Bernard Williams was coming apart. I was then membership secretary of the Labour Club. There was one of the usual internal scandals, and my college room was broken into to collect the membership records for said Labour Club. I was terribly upset by this, but Shirley was immensely comforting. She assured me I was right to make a real fuss about it and egged me on in doing so. I have been making a fuss about things ever since, thanks to Shirley.
Shirley would ask many of us younger women thinking about political interests and careers to work out what we really minded about. She would also always argue that party politics was not the only way we could influence things—though for her it was the main route—and that we should think about academia, as of course she herself did so successfully as a professor at Harvard for 12 years when married to the wonderful Dick Neustadt. She said that we should also think about NGOs.
She influenced many of us. Talking to a group of much younger women yesterday, I heard that many of them, in their 30s, also traced their willingness to enter politics, both local and national, to her straightforward way of talking with them, to her popularity with women voters—“Shirl the Pearl”, if people remember that—and to her immense personal kindness.
Of course, you could not go anywhere with Shirley without lots of people, often women, coming up to her and paying tribute. It was somewhat inconvenient. A group of us would go walking regularly in the Chilterns, and quite often people coming in the other direction would go past us, then realise they had just walked past Shirley Williams, turn back and come and pay tribute. It was wonderful, but slow.
Her obituaries have focused to a considerable extent on her encouragement of women, but they have not really focused on her immense personal kindness. Members of staff in this House have been telling me how kind she was to them, but we as a family have one particular, unforgettable example among many. A friend, Ralph Skilbeck, the former diplomat who became a headhunter, was dying of a very aggressive cancer in his early 40s. He told us how he desperately wanted to meet Shirley but never had. I rang Shirley, and immediately—without hesitation and without knowing him at all—she agreed to come and meet him, which she did a few days later. He was over the moon. He died a few weeks later, talking to the end about how amazing she had been.
I could give this House many other examples of her immense kindness; she was a profoundly good person. I believe her legacy will be memories of her immense strength of character; her inspirational qualities, particularly for younger women; the fact that she became a national treasure; and her legacy of kindness and goodness to so many people. She was a wonderful mother, and particularly grandmother, to her family, and I know they have been amazing to her in these past few years. I officiated with a blessing at her marriage to Dick Neustadt and said a blessing at Dick Neustadt’s funeral. I do feel that I can now say, “May she rest in peace”.

Bishop of Gloucester: I find myself rising again to give a tribute on behalf of the Lords spiritual from these Benches and wondering what I can add to all the wonderful things that have been said. However, as the first female Lord spiritual in this House, it is a privilege to pay tribute to an amazing person who, as we have heard, was something of a trailblazer for women in politics.
As a comparative newcomer to this House, I did not have time to get to know Baroness Williams, but now, as Anglican Bishop to Prisons, I was pleased to learn that she had once been a Prisons Minister and had a particular interest in improving the experience of women in prison. This may be an apocryphal story, but I believe that at one point she even asked to be locked up in Holloway to see what the experience for women was like. I am only sad that I never had a conversation with her about women in the criminal justice system.
As we have heard, Shirley was one of the iconic figures of British politics, shaped by the post-war world and one of those rare politicians known in public simply by her first name. Although she often seemed to struggle to acknowledge her own brilliance, from the outside others saw her talent and razor-sharp mind.
So much has already been said, but I wish to draw attention to her faith. She came from the tradition of politics of people grounded in internationalism, Catholic social teaching and social justice. Often found at Lambeth Palace, she was prepared to work across parties without fear or favour, with people of all faiths and none, to develop ideas and policy to the betterment of British society. Her Catholic faith and belief in universal values were central to her politics. In her final speech to this House, she called on us as the institutional memory of the nation to protect universal values of human rights, to play our significant part in the world and to think globally, not simply nationally. I can think of no clearer call from Baroness Williams to this House, and it is one shared by the Church: a commitment to social justice, protecting the vulnerable and being committed to global thinking.
After her many decades of faithful public service, I wish to end with the prayer: may she rest in peace and rise in glory.

Lord Fowler: My Lords, I will just add this very briefly. I saw Shirley Williams in action both in the Commons and in the Lords. When I was in the Commons as a member of Margaret Thatcher’s Cabinet, I did not get the impression that she was one of our natural supporters. She was in fact a formidable critic, but I will say that she was always fair in her criticism. When she came to this House, as we all remember, she retained that fairness of judgment. I remember with gratitude her support for my campaign on phone hacking, for example.
Above all, I will remember her for one thing: in an age when politicians are criticised, rightly or wrongly, for being more interested in what they can get out of politics, she was entirely motivated by what she could  give, what contribution she could make to the public good—and her contribution was vast. I will remember her as a true politician and an example to us all.

Arrangement of Business
 - Announcement

Lord Fowler: My Lords, Oral Questions will now commence. Please can those asking questions keep them short and confined to two points? I ask that Ministers’ answers are also brief.

UK Citizenship: History
 - Question

Lord Wallace of Saltaire: To ask Her Majesty’s Government when they plan to revise the historical section of the Life in the United Kingdom handbook for people applying for United Kingdom citizenship.

Lord Parkinson of Whitley Bay: My Lords, the Life in the United Kingdom handbook is for all UK residents who need to meet the knowledge of life in the UK requirements when applying for either settlement or citizenship. New impressions are published regularly to keep it up to date, most recently in February, and plans to review the handbook are due for consideration later this year.

Lord Wallace of Saltaire: The Minister knows very well the sharp criticisms that professional historians have made of the rewriting of the historical section some eight years ago, changing its interpretation of the slave trade, of imperial history and of domestic political controversies. In the next major revision, will the Government consult outside and cross-party advisers, particularly over the portrayal of Britain’s engagement with the countries from which so many of our new citizens come, such as the United States—my American daughter-in-law has just taken the test—the Indian subcontinent, the Caribbean and Africa?

Lord Parkinson of Whitley Bay: Yes, I am well aware of the letter from historians; I had an interesting exchange about it last summer with Professor Frank Trentmann, its lead author. Criticism of the history sections of these tests is perennial. The first edition, written by the late Professor Sir Bernard Crick, was criticised by historians, as was the more recent edition, which was published under the coalition Government. We are grateful to the historians for their thoughts. They made some valid and thought-provoking comments that will certainly be taken into account as we review the handbook, but we do not agree with all the criticisms that they made and are wary of history by petition, no matter how eminent the petitioners.

Baroness Mobarik: My Lords, in acknowledging the importance of having a robust and fair mechanism by which citizenship is awarded, does the Minister agree that the life in the United Kingdom test should only ask questions of applicants that those who already hold citizenship could reasonably answer? If my noble friend agrees with that, what actions is the Home Office taking to ensure that the questions in place value and reflect the contribution that the applicant may already have made to both their community and British life more generally prior to their bid for citizenship?

Lord Parkinson of Whitley Bay: My noble friend is absolutely right. People who come to this country and settle here or become citizens make a valuable contribution even before they may take citizenship. The first part of her question allows me to explain that this is a 24-question test with multiple answers. People need to get only three-quarters of them right, and the recent pass rate of 79% suggests that it is a test that people are able to pass.

Baroness Wheatcroft: My Lords, the French citizenship test involves an interview that puts the candidate in an everyday situation; a friend of mine had to imagine that he was buying a washing machine. Does the Minister think the UK test is relevant? Does he believe that the following questions for British citizenship are relevant, and can he answer them? When was the time of growing patriotism? When were the last Welsh rebellions defeated? How many colonies were granted independence in 1947? I look forward to his answers.

Lord Parkinson of Whitley Bay: My Lords, I believe Standing Orders say that only two questions are allowed in Oral Questions. More pertinently, as I explained, the questions that are put are multiple choice. They are not, as the noble Baroness frames them, designed to catch people out; they are there to encourage people to engage with the story of our nation so far, before they help us to write the next chapter of it. Previous versions of the Life in the United Kingdom handbook did not examine people on the history section, which meant inevitably that lots of people skipped it. I hope she will agree that it is beneficial to check that people have engaged with the glorious past of our country before they help us to write the next chapter, as I say.

Lord Fowler: I do not think the noble Lord, Lord Morgan, is here, so I call the noble Baroness, Lady Ludford.

Baroness Ludford: My Lords, the Minister talked about a review later this year. I assume that is the review that was announced in October 2018. Can he confirm that it will be a public consultation? In reviewing the test, will the Government look at a report by Thom Brooks, professor and dean at Durham Law School, who, originally being American, took the test himself? He said that people had to learn the height of the London Eye in feet and metres but not about the UK Supreme Court or how many MPs there are. Does the Minister agree that the review must be thorough and radical?

Lord Parkinson of Whitley Bay: My Lords, the previous Home Secretary announced the intention to review the handbook. As I say, the handbook is constantly reviewed to make sure that it is up to date. We want to consider that more carefully, particularly in light of some of the criticisms and points that have been raised. The noble Baroness mentioned another academic. I understand that Professor Brooks is an adviser to the Labour Party. He has certainly made his representations on the citizenship test well known.

Lord Kennedy of Southwark: My Lords, the test is not the only barrier that people can face to accessing citizenship. The High Court has recently upheld a ruling that the exorbitant fees that children are charged are unlawful, as they are set without consideration for the best interests of the child. The Home Office has said that this will be reviewed in due course. Has work started on this review, or is the issue still sitting on the shelf waiting to be looked at? Families are left with this grossly unfair charge with no end in sight.

Lord Parkinson of Whitley Bay: The Government will consider the implications of the court’s judgement carefully and will review child registration fees in the light of the court’s judgment. We believe that it is important to strike the right balance by ensuring that people can obtain status in the UK and access appropriate services, without burdening the UK taxpayer.

Lord Lexden: Do not our prospective fellow citizens need, above all, a clear account of our constitutional development over the centuries? Without that, it is impossible to understand the role of our much-loved monarchy, of which we are particularly conscious at the moment, our multi-nation state and our parliamentary institutions and take pride in them—which all of them deserve.

Lord Parkinson of Whitley Bay: I completely agree with my noble friend. The history of this nation is a long, complex and evolving one. It is important that people are given a brief overview of it, so that they can engage with the country as it now is and understand things such as our proceedings here in your Lordships’ House.

Bishop of Leeds: My Lords, I am grateful for these answers and glad that this document will be revised in due course. It is a concise, often masterful, précis of some quite complex areas of our history, but surely a confident country can cope with complexity and with where we have failed—it is not just our glorious past. History matters. For example, in relation to the role of the Soviet Union during the Second World War, much of what is regarded as glorious standing alone by the western allies would not have been possible without the role of the Soviet Union, which lost 20 million people. Will the rewriting be open to a wider scrutiny, in order that history is perhaps taken more seriously?

Lord Parkinson of Whitley Bay: I certainly agree with the right reverend Prelate that a confident country engages with its history in all its complexities, including those parts which might be uncomfortable  to recall today. I do not fully agree with the way that he characterises the current text. I do not think it gives a misrepresented view of history; it includes some of the darker moments of our history as well. In the three editions of this document, historians have made their views well-known and long may they continue to do so.

Lord Jones of Cheltenham: Will the rewriting delete references to ancient battles which caused the deaths of so many innocent people and kings like Henry VIII, who is not an example of how a person should behave if they want to live in the United Kingdom?

Lord Parkinson of Whitley Bay: I think it is important that we understand history, and monarchs such as Henry VIII were hugely consequential, not least in the establishment of the Church of England. It is important that we know all of these things.

Lord Flight: My Lords, there is widespread agreement that the life in the UK test needs thorough revision and updating. It has been repeatedly criticised for its random inaccuracies and the irrelevance of much of its content to life in the UK today. I trust, however, that we will not end up with a document which is even more biased in the other direction. I studied history at Cambridge many years ago, where one excellent tripos was on the expansion of Europe—introduced to counter previous left-wing bias in writing about UK history. When Britain’s involvement in slavery is addressed, I trust it will include the facts that slavery was imported from west Africa and, between 1500 and 1800, 2 million British citizens from the west coast were enslaved by the Morocco of the time—

A noble Lord: Question!

Lord Fowler: Could you ask a question, please?

Lord Flight: My question is: who will be writing the revised historical section of the handbook? The open letter from 180 historians looks to have its own substantial bias.

Lord Parkinson of Whitley Bay: I also studied history at Cambridge, a little after my noble friend, but I think that some of the papers were still the same when I was there. The point he makes illustrates how difficult it is for any single person to write a history that does not spark debate, and the purpose of it is to do just that. History is a process of constant inquiry, of re-evaluation and of reconsidering the past and the lessons it can teach us. The history section of the life in the UK test is a starting point for people to engage with the past before they make their valuable contribution to our nation in its future.

Lord Fowler: My Lords, all supplementary questions have been asked and we now move to the next Question.

Initial Teacher Training Market Review
 - Question

Lord Knight of Weymouth: To ask Her Majesty’s Government what consultation they have undertaken with providers about the market review of initial teacher training.

Baroness Berridge: My Lords, the initial teacher training market review is focused on how the sector can provide consistently high-quality training in a more effective and efficient market. An expert advisory group has been appointed to make recommendations to the Government. Ian Bauckham is the review chair and has held early discussions with ITT network chairs and others. We have committed to wider sector engagement in late spring, and your Lordships are the first to be told that we are now going to conduct a public consultation on final proposals before they are implemented.

Lord Knight of Weymouth: My Lords, I thank the Minister for her Answer and welcome the latter part of it in particular. I also remind the House of my education interests in the register. I hope that this review is truly independent, unlike the Commission on Race and Ethnic Disparities. So far, it appears to have alienated virtually every provider of teacher training in the country, with the likes of our top universities now questioning whether they will continue with initial teacher training because of the potential infringement on their academic freedoms and issues of financial viability. Can the Minister assure the House, in the context of that consultation, that the evidence and principles upon which the review might proceed will be properly consulted on so that, as a sector, we can properly debate how the service of teacher training might be revised in future?

Baroness Berridge: My Lords, the review chair Ian Bauckham is a man of great integrity who has conducted a number of tasks for the department, so we have every confidence that he will engage widely with and receive views from across the sector. The core content framework is a structure, so the curriculum is developed by universities and therefore academic freedom is retained.

Lord Lancaster of Kimbolton: The Government have, rightly, long identified service leavers as being ideal candidates for teacher training. With predicted end of service dates being based on age and length of service, many start retraining up to three years before leaving. My concern, though, is that much of the support is not available until after they leave. Will my noble friend consider making that support as flexible as possible so that they can access it before they leave?

Baroness Berridge: My Lords, the expertise of former members of the Armed Forces is an important supply for teacher training, and many initial teacher training providers do offer their courses part-time so  current personnel can make that transition. In shortage subjects, such as chemistry, bursaries are available of £24,000.

Lord Watson of Invergowrie: My Lords, although the initial teacher training market review group has been meeting since the autumn, its deliberations have been shrouded in secrecy. What has leaked out is the suggestion that the Government will introduce a new system of short-term contracts following the review, which has led, as my noble friend Lord Knight has said, to many universities warning that they may withdraw their teacher training provision as a result. I welcome the Minister’s announcement just now of consultation later this year. Can she explain why the so-called expert advisory group undertaking it does not contain a representative from a university, despite that sector currently producing around one-third of newly qualified teachers?

Baroness Berridge: My Lords, it is important that we conduct this review to ensure that the market provides for the 25% increase this year of those applying for initial teacher training. Professor Samantha Twiselton is actually on the staff of Sheffield Hallam University, and I can assure noble Lords that, as universities are involved in providing, I think, 47% of initial teacher training, they will of course be key in the review’s progress.

Lord Storey: My Lords, the Minister is clearly impressed with initial teacher training in this country, judging by her detailed reply to my Written Question on this subject, for which I thank her. As the Minister’s department is publishing an international strategy for exporting English initial teacher training as the gold standard, does she now think that there is a quality problem, or not?

Baroness Berridge: My Lords, I am grateful for the noble Lord’s comments about the Written Answer, which is also informed by the right honourable Nick Gibb, the Minister whose portfolio area this is. In relation to quality, we want to ensure that every person who goes to initial teacher training has that joined-up experience gained from the academic path and being in the classroom. We want to build on the good quality and have asked that the review look at the sufficiency of teacher supply, which is an issue in some parts of the country.

Baroness Coussins: My Lords, over four years ago, at the Government’s request 15 universities developed a modern languages pathway to qualified teacher status, alongside the languages degree. In the light of the current shortage in this subject, are these programmes part of the market review, and is their future, along with school-centred MFL training, to be safeguarded and continued?

Baroness Berridge: My Lords, this review covers the full breadth of the initial teacher training market, so that we can build on the quality that we have. The institutions that the noble Baroness refers to will be able to make their views clear during the public consultation on any recommendations from the review,  and there will be stakeholder engagement during the spring. I will take back the noble Baroness’s comments about those institutions and write to her on whether they are part of that process.

Baroness Altmann: My Lords, I congratulate the Government on their aim of ensuring more standardisation in initial teacher training programmes so that we have consistent standards of basic training for all our teachers. Does my noble friend agree that good quality teaching has been at the core of trying to help so many children through a difficult year, and that our teachers have risen to an exceptionally difficult challenge over the past year?

Baroness Berridge: My Lords, good quality teaching is not the only, but the single most important, determining factor in the quality of education, particularly for disadvantaged students. At a time when not only are we reviewing initial teacher training but, as of September, £130 million will be invested annually to provide two years of professional development after initial teacher training, it is key to put teachers’ professional development on a parity of esteem with that of accountants and lawyers, for example.

Baroness Janke: My Lords, there are concerns that the market review will recommend a less diverse, highly centralised provision of initial teacher training. What assurances can the Minister give that specific and diverse local needs will be addressed and respected in any future ITT provision?

Baroness Berridge: My Lords, maintaining a good quality and efficient market for initial teacher training is a key part of the review. Some 240 organisations are accredited by the department at the moment; we are aware that in all, some 1,000 organisations deliver programmes. We have therefore asked that the review look at these aspects, and in particular teacher sufficiency across England.

Baroness Stuart of Edgbaston: My Lords, I draw attention to my interests as recorded in the register. I understand the Government’s desire for an efficient and effective market. That, however, does not guarantee that regional inequalities are addressed. I urge the Minister to make a risk assessment of the quality, supply and regional needs of initial teacher training and to publish the outcome.

Baroness Berridge: My Lords, the recommendations will be published and consulted on, and, as I have outlined, teacher sufficiency across England is a key part of the review. As to the early introduction of the early career framework, 1,900 teachers were part of the first rollout in the north-east, Greater Manchester, Bradford and Doncaster, so we are particularly aware of the need to ensure the best quality of teaching across England.

Lord Lucas: Will the Government put in place a system to ensure that students interested in entering ITT have a clear view of the quality and reputation of the provider as perceived by schools that have employed their graduates?

Baroness Berridge: Ofsted will be reintroducing its inspections following the introduction of a new framework for initial teacher training, which is the main quality mark for people considering initial teacher training. School-centred initial teacher training is now a vibrant part of the market. Teachers are trained by multi-academy trusts and others, and we are in an age where it is much easier to find out about the reputation of the institution, people’s experiences of it and other peer-to-peer comparisons through LinkedIn and other platforms.

Lord Fowler: My Lords, the time allowed for this Question has elapsed. We now come to the third Oral Question.

Undercover Policing Inquiry
 - Question

Baroness Clark of Kilwinning: To ask Her Majesty’s Government what assessment they have made of the progress of the Undercover Policing Inquiry into police surveillance, established in 2015.

Baroness Williams of Trafford: My Lords, the inquiry’s investigations are independent of the Home Office, and I welcomed the commencement of its evidential hearings in November 2020. The department maintains regular liaison with the inquiry on sponsorship issues such as progress and expenditure. We remain of the view that it is important for the inquiry to report as soon as practicable, as set out in its terms of reference.

Baroness Clark of Kilwinning: I thank the Minister for that answer. As she is aware, one of the reasons why the inquiry was established was that a number of women had dishonestly become involved with undercover police officers in quite an abusive way—some of them, indeed, having children by those officers. One of the calls from many of the participants in the inquiry was for the inquiry to be public and live-streamed. One of the reasons for that is that there may be many more women who have been dishonestly treated in this way—and more children whose fathers are undercover police officers. Will the Minister look at live-streaming the inquiry and at how it can be made public, so that the images and names of the undercover police officers are more readily available and activists can see whether they have been impacted in some way?

Baroness Williams of Trafford: The inquiry chair has already opined on the publication of a list, and the noble Baroness will know what his comment on that issue was. I understand her point about women being involved with undercover police, and some of them getting pregnant and having children. On televising proceedings, she would need to go to the inquiry chair to request that; the inquiry is independent of government.

Lord Morris of Aberavon: What is the cost of the inquiry to date and what is the target date for its report? It is acquiring the aura of the Saville inquiry. How many immunities have been granted by the Attorney-General? Since it has been said that the legitimacy of the inquiry is bound up with the full co-operation of its participants, is it diminishing?

Baroness Williams of Trafford: The cost to date is £36.2 million. The report to the Home Secretary is due before the end of 2023.

Lord Mackay of Clashfern: My Lords, will my noble friend say whether there is any mechanism to ensure that an inquiry as important as this will report in a reasonable time?

Baroness Williams of Trafford: My noble friend makes a very pertinent point because, of course, some of the inquiry goes back to 1968, so timeliness is very important. As members of the sponsor department of a statutory inquiry, both the Home Secretary and the Permanent Secretary have sponsorship responsibilities that are set out in the inquiries management statement. I have personally engaged with the chair in my capacity as sponsor to discuss the progress of the inquiry and stress the importance of learning lessons promptly.

Lord Paddick: My Lords, given that the Covert Human Intelligence Sources (Criminal Conduct) Act was recently passed by this House with Labour and Conservative support—giving the police the ability to give CHIS participating in protests immunity from prosecution, with no specific prohibition on CHIS acting as agents provocateur—what reassurance can the Minister give to the House that police CHIS were not involved in recent protests against the Police, Crime, Sentencing and Courts Bill?

Baroness Williams of Trafford: HMICFRS published a report just last month on policing protests. It concluded that there was no use of undercover officers in protest policing, which appears proportionate to the nature of criminality inherent in protests generally. It makes only brief reference to the ongoing undercover police inquiry.

Baroness Jones of Moulsecoomb: My Lords, the chair of the inquiry has ruled that the Special Branch registry files, which could give more information about the work of undercover officers, will not be part of the inquiry. That means that the truth will be very filtered, which makes it hard for core participants, who feel that they will not get justice. Would the Minister agree to a meeting with me and perhaps a member of each of the opposition parties to discuss the major flaws in the inquiry and why the core participants are so upset?

Baroness Williams of Trafford: Just before Questions, I said to the noble Baroness that I would look into what I could and could not do because, of course, the inquiry is independent, and rightly so. Parliament would expect it to be independent and therefore would not expect interference from the sponsoring Minister—but I will take back her point.

Lord Rosser: Can the Government give an assurance that, following the conclusion of the Mitting inquiry, any people who were actively spied upon by the police, including individuals who may have been tricked into intimate relationships with undercover officers, will be made aware of what occurred and will not be denied access to justice?

Baroness Williams of Trafford: My Lords, I am sure that the rationale would not be to deny people access to justice. Clearly, the revelation of any names would be a matter for the chairman of what is an independent inquiry.

Lord Moylan: My Lords, the inquiry was set up in 2015; over five years passed before opening statements were delivered. Some 90 staff are directly engaged, and, as my noble friend has said, the cost, so far, exceeds £36 million, but that excludes very considerable expenditure by police forces responding to the inquiry. I estimate that the inquiry’s total cost to the public purse, by the time it reports—well into the current decade—will be in excess of £100 million. Can my noble friend the Minister tell me if that is a reasonable forecast that the department is budgeting for?

Baroness Williams of Trafford: I am not sure whether it is a reasonable forecast, but, responding to my noble friend’s points, I can say that the inquiry needs to deliberate promptly and with an eye properly on its use of public funds in order to do so.

Baroness Ritchie of Downpatrick: My Lords, could the Minister confirm what the direct role of the inquiry is around undercover policing with other police forces, given that infiltration took place in organisations with a UK-wide reach?

Baroness Williams of Trafford: I assume that the noble Baroness is referring to Northern Ireland. It is probably inappropriate to comment on that at this point, while judicial proceedings are ongoing.

Lord Mann: An inquiry cannot request files where it does not know that they exist. Can we be assured that there are no files within the Home Office that have not been sought out, retrieved and provided to the inquiry?

Baroness Williams of Trafford: If the Home Office is asked for files that it has, it would most certainly have to provide them to the inquiry.

Lord Fowler: My Lords, all supplementary questions have been asked, and we now move to the fourth Oral Question.

Global Minimum Corporate Tax Rate

Baroness Bennett of Manor Castle: To ask Her Majesty’s Government what plans they have to support the proposal by the government of the United States of America for a global minimum corporate tax rate (1) as part of the United Kingdom’s Presidency of the G7, and (2) in other fora.

Lord Agnew of Oulton: My Lords, the UK has an established record of being at the forefront of initiating global action on international tax. It is no different here: during our G7 presidency, we are leading the way to ensure the delivery of G20 commitments that we secured in January 2019 for a comprehensive global solution based on two pillars. Pillar 1 would deliver on ensuring that businesses are taxed where they make their profits, and pillar 2 would deliver a global minimum tax.

Baroness Bennett of Manor Castle: I expect that the Minister will acknowledge that, with their plan to raise the UK corporate tax rate, the Government have, at least implicitly, acknowledged that the 30-year-long global race to the bottom on corporate tax rates has led to major multinational companies not paying their way, while reeling in profits, building inequality and starving public services of essential funds. I also expect that the Minister will know that the recommended and UK-planned 25% minimum rate, as recommended by the Independent Commission for the Reform of International Corporate Taxation, would raise more than £22 billion for the UK Exchequer. Given that, and given that Germany, France and the Netherlands rapidly supported the US intervention, why is the UK not at the forefront, as the Minister said, but trailing well behind? Why have we not stepped in and backed this plan?

Lord Agnew of Oulton: My Lords, we have always been a Government who want to reduce taxation wherever possible. However, the Government have been very active in dealing with the abuse of corporate taxation over the last few years—for example, with the corporate interest restriction rules, which prevent multinationals from avoiding tax using financing arrangements, raising £1 billion a year since 2017. Other examples are the diverted profits tax, which has led to an additional £5 billion by countering aggressive tax planning, and the tax charge on offshore receipts in respect of intangible property, which is forecast to raise £1 billion a year.

Lord Empey: Since we left the European Union, the Government say that we must retain control over our money and laws. Is there a danger that we could end up replacing one group of people who are able to tell us what we can and cannot do with our money and laws with another group, other than the European Union? In such circumstances, is there a risk that the United Kingdom actually restricts its freedom and ability to control its own economy?

Lord Agnew of Oulton: I am not sure whether the noble Lord is referring to the move by the American Government to put forward their own propositions on international tax reform, but it is important to clarify that the US Government are following the G7 work that has been done on pillars 1 and 2. It is rather good news that they are engaging in a much more front-footed way than happened under the previous Administration.

Baroness Noakes: My Lords, I hope that my noble friend will agree that the suggestion from the US that the minimum tax rate might be as high as 21% has  no chance of global agreement. However, do the Government think that there is any level at which a global deal might be done?

Lord Agnew of Oulton: I can only speculate on what that might be, but the important thing is to try to get as much harmonisation on rules for large multinational companies. That is why we were always keen on pillar 1, which ensures that the profits of large digital businesses are taxed in the countries where they make their sales. It is important because, as one of the largest economies in the world, we believe that these international companies should not be able to just come here and take all the advantages of the infrastructure that British taxpayers are contributing to the creation of.

Lord Bilimoria: My Lords, the CBI, of which I am president, welcomes the United States’ renewed commitment to engage with the OECD multilateral process, which, after a decade, has two pillars. One is a new regime for the largest companies; the other is on setting a minimum tax rate, which the US aims to see at 21%. Do the Government agree with this rate of 21%? Do they agree that we want to avoid a patchwork of unilateral action—for example, digital services taxes?

Lord Agnew of Oulton: My Lords, the Treasury is assessing the statements recently made by the US Government on that tax rate, so we are not in a position to opine on those yet. We agree on the patchwork point: we introduced the digital services tax as an interim to plug at least some of the gaps and problems that exist, but we will certainly review that if we can reach an international consensus.

Lord Sikka: My Lords, I draw attention to my entry in the Members’ register. A strong, global, minimum tax on multinationals would recover much-needed billions for this country and others. Does the Minister agree it is essential for such a tax to provide a fair balance of taxing rights to all countries, based on allocation factors reflecting the real activities in each country, with a high minimum such as the 21% proposed by the US Administration?

Lord Agnew of Oulton: As I answered to an earlier question, we are not yet in a position to announce whether we support that specific rate. Our policy has always been to put the emphasis on pillar one, which is the allocation of profits in the countries in which they are generated. To go back to my earlier point, if a company is going to use the infrastructure of a country in terms of its affluent, well-educated population, and take profits from it, it must contribute to it, too.

Baroness Kramer: My Lords, do the Government understand, having listened to the international response to the Biden Administration and Janet Yellen’s proposals, that pillars one and two hang together and that there is no serious prospect of getting a solution to the right of countries to tax multinationals appropriately for the activities in their country unless there is also a  common agreement on a minimum global corporate tax? Do the British Government accept that underlying principle, even if they dispute the rate?

Lord Agnew of Oulton: The overriding position is that we welcome the American Government’s re-engagement in this process. As realists, we accept it will not happen without full American support. We agree with the noble Baroness that these things hang together, and it will be a cohesive result that will work.

Lord Hannan of Kingsclere: My Lords, international tax competition is an important constraint on big government. You can raise the rate only to a certain point before the revenue and jobs begin to flee to friendlier jurisdictions. For that reason, it has always chafed with people who want a very large state. Will the Minister accept that the logic of the Laffer curve is not an academic theory but an empirically observable reality—that every cut in corporation tax, down to our current rate in this country, led to an increase in revenue? Will he further accept that having a competitive rate of corporation tax is an important growth strategy for a developing country? The formula that worked for Singapore, Hong Kong and eastern European countries would be cut off if we created a global high-tax cartel.

Lord Agnew of Oulton: My Lords, we did not plan to increase corporation tax in the way we have had to do in the last few months. It is only as a result of the appalling crisis we have suffered through Covid and having to address the financial impact of that. I agree with my noble friend that lower corporation tax rates are broadly a good thing. Personally, I do not like to see tax on productive activity, employment or any of the things that make a country prosperous. Therefore, I support his comments that we should always aspire to lower tax rates, particularly on corporation tax. We will try to set it still at a competitive rate, so the US, Canada, Korea, Japan and Germany will all have higher rates than the one to which we are moving.

Lord Collins of Highbury: My Lords, the UN high-level panel published its final report on the impact of financial integrity on sustainable development. The panel called for a UN tax convention and a UN body for international tax rules. The report also includes proposals for the automatic exchange of information, beneficial ownership transparency and country-by-country reporting. Do the Government support the high-level panel’s conclusions, and will we address this issue at the G7?

Lord Agnew of Oulton: My Lords, the Government do support increased transparency, and we have done a great deal over the last five years to improve on that, but I accept there is more to do.

Lord Fowler: My Lords, the time allowed for this Question has elapsed, and it brings Question Time to an end.

St Vincent: Volcanic Eruption
 - Private Notice Question

Lord Boateng: Asked by Lord Boateng
To ask Her Majesty’s Government what assessment they have made of the (1) humanitarian, and (2) environmental, impact of the recent volcanic eruption on the island of St Vincent; and what representations they have made to the government of St Vincent and the Grenadines regarding aid.

Lord Ahmad of Wimbledon: My Lords, I am sure I speak for the whole House in saying our thoughts and prayers are with those impacted and affected by the shocking volcanic eruption in St Vincent. We, the United Kingdom, have pledged, and I have personally approved and ensured, £200,000 to the Caribbean Disaster Emergency Management Agency—CDEMA—to help to address the immediate humanitarian impact. This will be used for emergency supplies and other immediate needs, including to allow technical experts to support relief efforts on the ground, support emergency telecommunications and restore critical lifeline facilities. We stand ready to look at further support.

Lord Boateng: My Lords, while thanking the Minister, we can and must do more. I have been in touch with St Vincent and Barbados overnight. The position is that ash continues to fall, and there is a shortage of water. The reality on the ground is of the loss of livelihoods and a continuing threat to life. This is a major environmental and humanitarian emergency, and £200,000 will not cut it. The CDEMA needs technical support. I hope the Minister will authorise that a team go out from the UK to assess the needs. It needs help with the field hospital. Barbados is taking a lead, and is responsible for the emergency relief in the area, but it is hard pressed, and the time has come for this country to act. After all, the prosperity of these islands was based on the labour and sugar of those islands. They deserve more than £200,000.

Lord Ahmad of Wimbledon: My Lords, first and foremost, let me assure the noble Lord that I, too, am in touch with the authorities. Even this morning, I spoke to the high commissioner of St Vincent and the Grenadines and assured him of the initial support we gave, which, as I outlined, is specifically for emergency support. The noble Lord rightly articulates the importance of technical support. We are already providing that; we are working closely, including with some of our overseas territories. The noble Lord will be aware of the challenges that Montserrat faced two decades ago and, based on that experience, we are working directly with the Montserrat authorities. We have a volcanologist already on the ground supporting relief efforts, and we are providing technical support. This was the initial, immediate response that we gave last week. There has been some negative press. The only reason why we have not articulated the number of steps we are taking, as the noble Lord would expect, is the current respect and reverence we owe to the demise of the Duke of  Edinburgh. However, we are supporting fully the authorities on the ground in St Vincent and the Grenadines and stand ready to offer further support.

Lord West of Spithead: My Lords, we have a ship based in the Caribbean specifically for disaster relief. Ships, of course, can make fresh water and they have engineers and all sorts of things needed for disaster relief. I am amazed that it does not seem that this ship, HMS “Medway”, is working in the Grenadines at the moment. Of course, because she is not a destroyer or a frigate, she does not have an organic helicopter, which is very useful in disaster relief circumstances. Are we going to airlift out a helicopter for her and when will she be working in the islands, assisting those who need so much help?

Lord Ahmad of Wimbledon: My Lords, the noble Lord is right to point out that we have a permanent presence in the Caribbean and work very closely with the relief organisation CDEMA. We have invested, since 2017, on specific relief efforts, not just for the overseas territories but for the Caribbean. I note what he has said and we stand ready to provide whatever assistance is required, not only to St Vincent and the Grenadines but to Barbados as well. On the specific issue of aircraft and helicopters in the area, the volcanic ash over both islands at the moment is causing an added challenge. But I assure all noble Lords that we are working closely with the authorities on the ground to see what further assistance can be provided.

Baroness Northover: My Lords, we understand that only those who have been vaccinated are being evacuated, potentially leaving behind children, young people and others. What engagement are we having with the Government of St Vincent and the Grenadines, and the WHO, to ensure that all who are vulnerable can be evacuated?

Lord Ahmad of Wimbledon: My Lords, the noble Baroness is right to point to the issue of vaccinations. Currently, about 12% of the population in St Vincent has been vaccinated and there is a lot of reluctance to have vaccinations. She may be aware that Prime Minister Gonsalves announced on 12 April that their Government will not be looking at evacuating through cruise ships. There are green zones on the islands, which are currently being used to house about 3,700 people who have fled their homes, while about 16,000 are being sheltered by families and friends. There is now a significant number of vaccines on island; the great challenge—and again, in my conversations this morning, I offered any learnings we could bring to address the issue—is the reluctance of the population to be vaccinated.

Earl of Shrewsbury: My Lords, is my noble friend aware that as a teenager I lived in St Vincent, at Calliaqua? It is the most magical place, with delightful people. I experienced a hurricane there and was nearby when La Soufrière blew her top last time. It is not a wealthy area by any means. The main sources of income are agriculture and tourism; both have been devastated by this natural disaster. It will take a long time for the place to recover, as it will the islands around there. Agriculture, especially, will take a while  to recover, because of the thick covering of volcanic ash. We must help these islands in every way we possibly can, whether financially or with military personnel, or a combination of both, but we must help them all.

Lord Ahmad of Wimbledon: My Lords, I welcome the insights that my noble friend has provided. I reassure him that we are working very closely in any support we can provide. The noble Lord, Lord West, asked about HMS “Medway”. To be quite specific, prior to the volcanic eruption that vessel was undergoing routine operational updates and repairs. That is why it has not been immediately deployed, but I assure him that it is one of the immediate questions I have raised. I emphasise again that we are working directly with the authorities on the ground, whether it is with technical or long-term support. I have visited Montserrat and seen the impact of a volcano that erupted more than 20 years ago; the fact is that its impact is still felt today. We seek to provide long-term support and, I assure noble Lords, we will do just that.

Earl of Devon: My Lords, what direct contact have the Government made with any NGOs working on the ground in St Vincent, particularly local churches working with evacuees, such as Marion House in Kingstown and St Vincent Girls’ High School?

Lord Ahmad of Wimbledon: My Lords, our primary contact is through the relief efforts of the International Committee of the Red Cross. As for specific liaisons on the ground, we are working directly with CDEMA and the St Vincent and the Grenadines government authorities.

Bishop of St Albans: My Lords, the diocese of the Windward Islands is linked with my diocese here in St Albans and I have been in touch with the bishop, Bishop Leopold Friday, overnight. The churches are already doing a huge amount of work and stand ready to help in any way they can, not least because here in my diocese, in Luton, we also have a large Vincentian population and this matter is affecting people’s families. If there are people who are forced to evacuate from the country, will the Government consider a temporary resettlement scheme for those with family links here in the UK?

Lord Ahmad of Wimbledon: My Lords, I fully acknowledge what the right reverend Prelate says about the important role that church authorities play. Indeed, on the question raised by the noble Baroness, Lady Northover, about the vaccine rollout, I suggested to the high commissioner this morning how the churches can also assist. On the right reverend Prelate’s wider question about long-term impacts, we will obviously remain engaged with the authorities of St Vincent and the Grenadines about their medium and long-term requirements.

Lord Collins of Highbury: My Lords, I share my noble friend’s concern at the amount of the initial response on the humanitarian effort but, of course, it is not just a humanitarian effort. At the request of  Prime Minister Ralph Gonsalves, the UN Environment Programme is now developing and implementing a debris management plan to clean up ash and promote environmental health and safety in the longer term, so that we are getting the economy back on track as soon as possible. Are we working with the United Nations Environment Programme, and have we offered professional support to that programme in the near future?

Lord Ahmad of Wimbledon: My Lords, we are working with all international agencies, including the United Nations, but I reiterate that the lead agency on disaster response is CDEMA. We are working constructively on all elements including immediate responses, medium-term responses and additional responses that will be required.

Lord Randall of Uxbridge: My Lords, I declare my interest as a vice-president of Fauna & Flora International. While I completely understand that the priority must be the safety of the islanders and their economy, may I gently remind my noble friend of the unique endemic wildlife, such as the St Vincent parrot? Will Her Majesty’s Government consider what assistance they can offer in due course to the various NGOs to ensure that the endemic wildlife of the island is conserved and protected from any potential accidental introduction of non-native species by those providing much-needed relief to the island?

Lord Ahmad of Wimbledon: My Lords, I always welcome gentle reminders from my noble friend. I assure him that we recognise the importance of biodiversity, especially in the context of climate change and our chairmanship of COP26. He made some notable suggestions and recommendations and I certainly look to take them forward.

Lord Foulkes of Cumnock: My Lords, the Minister mentioned Montserrat. When Montserrat was devastated by that volcanic eruption, I was the Minister at DfID dealing with it and we sent out emergency relief teams immediately to help. Why is that not being done now? We also committed long-term help, not of thousands of pounds but of millions. Are these poor people going to be the first victims of the cuts in DfID assistance?

Lord Ahmad of Wimbledon: My Lords, while I also welcome the valuable insights of the noble Lord, first and foremost, I assure him that we have given an immediate response, as I said to the noble Lord, Lord Boateng. What we have announced thus far is immediate support. The reason we are not sending out direct support is because we have invested, since 2017—I can speak with some insight and expertise—in CDEMA and in the structures in the Caribbean and the region to ensure that the response can be as effective and co-ordinated as possible. The noble Lord talks about Montserrat, which I continue to support. Indeed, it is this Government who have provided close to £30 million of capital spending to continue to help Montserrat. We are also supporting, through the Caribbean Development Bank,  specific projects including roadbuilding in St Vincent. That kind of long-term infrastructure support will also continue.

Baroness Garden of Frognal: My Lords, I am happy to say that all supplementary questions have been asked and answered.

Environment and Climate Change Committee
 - Membership Motions

The Senior Deputy Speaker: Moved by The Senior Deputy Speaker
That a Select Committee be appointed to consider the environment and climate change;
That, as proposed by the Committee of Selection, the following members be appointed to the Committee:
Boycott, B., Browne of Ladyton, L., Cameron of Dillington, L., Chalker of Wallasey, B., Colgrain, L., Lilley, L., Lucas, L., Northover, B., Oxford, Bp., Parminter, B. (Chair), Puttnam, L., Whitty, L., Young of Old Scone, B.
That the Committee have power to send for persons, papers and records;
That the Committee have power to appoint specialist advisers;
That the Committee have power to meet outside Westminster;
That the Committee have leave to report from time to time;
That the reports of the Committee be printed, regardless of any adjournment of the House;
That the evidence taken by the Committee be published, if the Committee so wishes.
That a Select Committee be appointed:
(1) To consider matters relating to the United Kingdom’s relationship with the European Union and the European Economic Area, including:
a) The implementation of any agreements between the United Kingdom and the European Union, including the operation of the governance structures established under those agreements;
b) Any negotiations and further agreements between the United Kingdom and the European Union;
c) The operation of the Protocol on Ireland/Northern Ireland;
(2) To consider European Union documents deposited in the House by a minister;
(3) To support the House as appropriate in interparliamentary cooperation with the European Parliament and the Member States of the European Union;
That, as proposed by the Committee of Selection, the following members be appointed to the Committee:
Couttie, B., Faulkner of Worcester, L., Foulkes of Cumnock, L., Hannay of Chiswick, L., Jay of Ewelme, L., Jolly, B., Kinnoull, E (Chair)., Lamont of Lerwick, L., Liddle, L., Purvis of Tweed, L., Trenchard, V., Tugendhat, L., Wood of Anfield, L.
That the Committee have power to appoint a sub-committee and to refer to it any matters within its terms of reference;
That the Committee have power to appoint the Chair of the sub-committee;
That the Committee have power to co-opt any member to serve on the sub-committee;
That the Committee and its sub-committee have power to send for persons, papers and records;
That the Committee and its sub-committee have power to appoint specialist advisers;
That the Committee and its sub-committee have power to meet outside Westminster;
That the Committee have leave to report from time to time;
That the reports of the Committee be printed, regardless of any adjournment of the House;
That the evidence taken by the Committee or its sub-committee be published, if the Committee so wishes;
That the evidence taken by the European Union Committee be referred to the Committee.
That a Select Committee be appointed to consider matters relating to industry, including the policies of Her Majesty’s Government to promote industrial growth, skills and competitiveness, and to scrutinise the work of UK regulators;
That, as proposed by the Committee of Selection, the following members be appointed to the Committee:
Allen of Kensington, L., Blackwell, L., Bowles of Berkhamsted, B., Burns, L., Curry of Kirkharle, L., Donaghy, B., Eatwell, L., Grade of Yarmouth, L., Hollick, L. (Chair), Noakes, B., Reay, L., Sharkey, L.
That the Committee have power to send for persons, papers and records;
That the Committee have power to appoint specialist advisers;
That the Committee have power to meet outside Westminster;
That the Committee have leave to report from time to time;
That the reports of the Committee be printed, regardless of any adjournment of the House;
That the evidence taken by the Committee be published, if the Committee so wishes.
That a Select Committee be appointed to consider matters relating to the built environment, including policies relating to housing, planning, transport and infrastructure;
That, as proposed by the Committee of Selection, the following members be appointed to the Committee:
Bakewell, B., Berkeley, L., Best, L., Carrington of Fulham, L., Cohen of Pimlico, B., Grocott, L., Haselhurst, L., Lytton, E., Moylan, L., Neville-Rolfe, B. (Chair), Stunell, L., Thornhill, B.
That the Committee have power to send for persons, papers and records;
That the Committee have power to appoint specialist advisers;
That the Committee have power to meet outside Westminster;
That the Committee have leave to report from time to time;
That the reports of the Committee be printed, regardless of any adjournment of the House;
That the evidence taken by the Committee be published, if the Committee so wishes.
That a Select Committee be appointed to consider justice and home affairs, including the domestic criminal justice system, and international cooperation in respect of criminal justice, civil justice, migration and asylum;
That, as proposed by the Committee of Selection, the following members be appointed to the Committee:
Blunkett, L., Chakrabarti, B., Dholakia, L., Hallett, B., Hamwee, B. (Chair), Hunt of Wirral, L., Kennedy of The Shaws, B., Ricketts, L., Sanderson of Welton, B., Shackleton of Belgravia, B., Pidding, B., Primarolo, B.
That the Committee have power to send for persons, papers and records;
That the Committee have power to appoint specialist advisers;
That the Committee have power to meet outside Westminster;
That the Committee have leave to report from time to time;
That the reports of the Committee be printed, regardless of any adjournment of the House;
That the evidence taken by the Committee be published, if the Committee so wishes.

Lord McFall of Alcluith: In December 2020, the Liaison Committee published a final report resulting from its extensive review of House of Lords committee activity. The report, which was subsequently agreed by the House in January, recommended the creation of five new sessional committees focused on the built environment; the environment and climate change; European affairs; industry and regulators; and justice and home affairs.  These committees, which build upon our earlier recommendations and changes, will give the House a new thematic committee structure which allows for more effective and comprehensive scrutiny of all major areas of public policy.
The Motions before us today are to appoint members to the new committees. It is expected that the European Affairs Committee will, at one of its early meetings, also appoint a sub-committee focused on the operation of the protocol on Ireland/Northern Ireland, completing the structural changes recommended through the review of committees.
In recent years I have received representations from across the House regarding the relatively low number of committees chaired by female Members of the House. With that in mind, I am pleased to note that three of the five committees that we are appointing today are to be chaired by women. Across all committees as a whole, excluding those chaired by office holders and Joint Committees chaired by MPs, one-third of our committees will now have female chairs, which represents good progress on recent years.
Today’s appointments also mark the end of an era, as the new committees will effectively take the place of our previous European Union Committee and its sub-committees, which published their final reports late last month and have now concluded their work. European Union Committee reports, whether before, after or during Brexit, have demonstrated a depth of inquiry, a level of expertise and comprehensive scrutiny that has not been matched elsewhere. I have previously paid tribute to the work of the noble Earl, Lord Kinnoull, and his colleagues, but wish once again, on behalf of the House, to thank them for the service they have performed in recent years.
Lastly, I remind the House that the review of committees has established a firm but flexible framework within which our committees will operate. We are in a position to consider future adjustments to our committee structures as and when the need arises, particularly during our annual reviews, the first of which is expected in the autumn. In this way, our comprehensive review, including the Motions before us today, should provide committees with a firm foundation for many years to come. I beg to move.

Lord Balfe: I have one question, and a couple of observations, on what will probably be the Senior Deputy Speaker’s last outing in this House. I am sure we all admire the work that he has done in his many years in the job.
The withdrawal agreement from the EU provides for the establishment of a joint parliamentary committee between the British Parliament and the European Parliament. I wonder whether the Senior Deputy Speaker can give us any information as to how the House of Lords is to be represented in that committee, and whether we will be taking one of either the chair or the three vice-chairs of that committee. I happen to know, because I wear several hats in this game, that the European Parliament has already decided on its chair and vice-chairs, so I just wonder what we are doing, who is leading for us and how it will fit into that structure.
My second point is that we seem to have again arrived at this position through some sort of magical mystery tour. We are told that the Committee of Selection has done this, but who has it approached? I have not seen anything. I have not been asked whether I would like to serve on a committee. How do these names come forward? I suggest that they come forward because all that we say about this being a self-regulating House is basically a load of old rubbish. The leadership runs this House. We are pushed around in whatever way a very small group of people chooses. It really is as simple as that.
I would like the Senior Deputy Speaker to follow the great tradition of leaving a note for one’s successor. He does not need to leave a note saying that there is no money left, but I think he could well leave a note saying that there is a call from some quarters—they may be unrepresentative, but I would certainly like to see it—for much greater democratisation.
In the other place, the chairs of committees are allocated to the political groups and then elected by the whole House on the basis that it can look and decide what the competencies are of those committees and the chairs can have the confidence of the House. They are not plucked out of some magical hat somewhere. I would like to see that procedure extended to this House. Clearly it cannot be done in this resolution, but I am getting a bit fed up with constantly going on about this. If the issue comes back yet again, with another series of committees and no movement whatever, I might just be tempted to divide the House—although I would lose—to prove that there are probably at least two people who support what I have got to say.

Baroness Smith of Basildon: My Lords, I had not intended to speak but will say just a brief word. I cannot speak for the noble Lord’s party, but I assure him that we on these Benches have a very open process of selection for committees. All Members are notified of committee vacancies; they are asked to apply and, in consultation, the Chief Whip makes a decision and our group discusses it. He obviously has grievances with his own group, for which I cannot speak, but I am looking at my colleagues behind me and know that they do not share those grievances.

Lord McFall of Alcluith: I thank the noble Lord, Lord Balfe, for that question on the European area. It was the joint parliamentary committee that was to establish the partnership assembly and already I have had informal discussions behind the scenes on that. I will write to the noble Lord further and put the letter in the Library for people to see.
The process of committee nominations is left to the usual channels of the parliamentary parties. It is for the parliamentary parties to engage with their members, and I assume that they are doing that. The Committee of Selection then gets those nominations and decides, at the end of the day.
Writing a note is quite good idea. The only thing that I would say are these two words: “Bye-bye”.
Motions agreed.

Greensill Capital
 - Commons Urgent Question

The following Answer to an Urgent Question was given in the House of Commons on Tuesday 13 April.
“Greensill Capital (UK) Ltd was approved by the British Business Bank for the Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme last year in accordance with the bank’s published guidance on accreditation. All decisions taken by the bank were made independently and in accordance with the bank’s usual procedure.
The criteria by which the decisions were made were based on those used in the existing enterprise finance guarantee scheme, dating back from 2009, and were set out in the CLBILS request for proposals, which was a publicly available document. These criteria included minimum requirements such as the ability to demonstrate a track record of lending to larger enterprises, provision of evidence-based forecasts, the ability to demonstrate sufficient capital available to meet the lending forecasts, a viable business model, robust operations and systems, that the proposed lending will not have unreasonable lender-levied fees and interest, and that the lender has all the necessary regulations, licences, authorisations and permissions to operate the scheme. All accredited lenders are subject to regular audit by the bank to ensure their compliance with scheme rules.
Following analysis of loan data as part of its standard due diligence, the bank opened an investigation into Greensill Capital’s compliance with the terms of the scheme in October 2020 and informed the Government of this on 9 October. That investigation is continuing and the Government’s obligations as guarantor under the CLBILS guarantee are suspended on a precautionary basis. It would not be appropriate to comment further on the investigation at this time.”

Baroness Smith of Basildon: My Lords, the government response fails to grasp the seriousness of this issue. Not only did the former Prime Minister lobby his mates through the backdoor for Greensill Capital but it now emerges that the Government’s chief procurement officer, Mr Crothers, a full-time civil servant, was also an adviser to the Greensill Capital board, apparently en route to becoming a director. I have here his letter to the noble Lord, Lord Pickles, in which he says he was given approval to transition back to the private sector, that it was not contentious and, he says, “not uncommon”. At best this is sloppy governance; at worst it is dodgy in the extreme. I have two questions: who gave that approval and how many other cases are there across Whitehall? The Minister should have that information. If he does not, I will settle for him writing to me. The Minister is known to be an honourable man. Is he really comfortable defending this?

Lord Callanan: I thank the noble Baroness for her questions. She will be aware that the Prime Minister has asked Nigel Boardman to conduct a review that will look into all  the decisions that were taken around these developments and the questions of supply chain finance, which was the original point of the question that was posed. I say to the noble Baroness that I think it is a good thing that there is some cross-fertilisation between civil servants and the private sector. It is wrong for people to have experience purely in the public sector. These are long-standing arrangements. It has happened under Governments of all political persuasions.

Baroness Kramer: My Lords, I hope very much that the Minister will rethink his response to the noble Baroness, Lady Smith. But my question is focused on the UQ itself. There are many press reports that the British Business Bank is now taking a look at the loans that Greensill made under the CBILS programme, but what investigation is going on to understand how on earth a company with as many red flags as Greensill was accredited to the CBILS programme in the first place? We all know that the British Business Bank told us, when we questioned why there were such long delays in many of the challenger and alternate lenders getting approval to make loans under CBILS, that it was a very thorough accreditation process, so we need some proper answers to that. Can he also tell us whether Greensill was put at the front of the queue for getting accreditation, along with any other companies that came with recommendations from Government or Conservative Party members, in the same way as the VIP system for procurement of PPE worked earlier in the year, which the Government have acknowledged?

Lord Callanan: The noble Baroness makes a number of allegations that are not supported by the facts. Greensill’s applications for accreditation to both CBILS and CLBILS were assessed independently by the British Business Bank on the basis of the separate criteria for those schemes, which were designed to be accessible to a range of lenders in accordance with the goal of supporting lending to businesses impacted by Covid-19. A number of similar companies went through the same process and were also accredited to the schemes.

Baroness Bennett of Manor Castle: My Lords, I agree with the noble Baroness, Lady Kramer, about the surprising nature of the Minister’s response to the noble Baroness, Lady Smith. Is the Greensill scandal not a sign of a systematic problem going back decades through successive Governments, arising from an ideological desire to bring for-profit business ideologies into what should be decision-making for the public good? Is it not now clear that business and the Civil Service should be two separate schemes of employment, without a revolving door between them? Given the current level of embarrassment, will the Government consider legislation so that Ministers, particularly Secretaries of State and Prime Ministers, are limited by statute not to take any paying role that enables them to use for personal enrichment the knowledge and contacts acquired during what should be a period of public service?

Lord Callanan: I just do not agree with the fundamental point the noble Baroness makes. Of course it is important that all decisions taken by Ministers  and civil servants are taken independently, but I return to my original point that it is a good thing that people have experience of the private sector—and that people in the private sector have experience in the public sector. There should not just be two distinct career paths which never meet. As long as the appropriate propriety and transparency are followed, it is a good thing.

Lord Sikka: My Lords, early last year three of Greensill’s major clients—NMC Health, BrightHouse and Agritrade—collapsed. This provided a reminder of the precariousness of its business model. We know that Greensill was not subject to capital adequacy tests by the FCA or the PRA, so how did the Government perform due diligence checks before approving it as a lender? Can the Minister give a firm commitment to publish all documents relating to Greensill’s designation as a lender?

Lord Callanan: I remind the noble Lord of the answers I gave to earlier questions. These decisions were taken not by the Government but by the British Business Bank, and there were also other non-bank lenders accredited under CLBILS. These were loans which the Government put in place in emergency conditions to save viable businesses. The whole object was to try to preserve jobs and employment in the economy. I am sorry if the Opposition do not think that is a good thing, but I think it is good that jobs are being preserved.

Lord Mackenzie of Framwellgate: My Lords, the Greensill affair was a scandal waiting to happen. Lobbying has tainted our politics for too long—those are not my words, but those of former Prime Minister Cameron 11 years ago. He even described how it works: the lunches, the hospitality, the quiet word in your ear, the ex-Ministers and ex-advisers for hire. It has worsened since then, as it appears that current civil servants can now be hired also. This is an opportunity to do what the former Prime Minister should have done: shine a light on the whole sorry business. Can it really be true that Bill Crothers, who worked in Whitehall for eight years and founded the Crown Commercial Service, controlling more than £15 billion of purchases, was at the same time employed by Greensill Capital? It beggars belief and needs to be rooted out. Can the Minister assure your Lordships’ House that all documents and records involved in this serious allegation of high-level cronyism will be published in due course?

Lord Callanan: The Prime Minister has announced a review into this matter. I have seen the media reports the noble Lord refers to, but the Boardman review will cover all available facts. The Government will provide all necessary documentation to that review, and all participants have said that they are willing to provide the appropriate information as well. The noble Lord should give him a chance to do his work and see what he comes up with.

Lord Foulkes of Cumnock: My Lords, the Prime Minister has said that the Greensill inquiry has carte blanche, so could the Minister assure the House that it will be able to look into the Scottish  Government’s failed deal with Gupta and Greensill for the Lochaber smelter, which has lost the taxpayer half a billion pounds? Will it also look into the private meetings over dinner which Scottish Minister Fergus Ewing had with them, of which no records were kept and which were not reported to the Civil Service? The Cameron sleaze seems to have crossed the border to the Scottish Government.

Lord Callanan: The noble Lord is nothing if not firm in the points he makes. I can speak only for the British Government on this, as I suspect he knows very well. I cannot comment on or speak for the Scottish Government on their dealings. Our review will examine matters for which the UK Government are responsible. Perhaps he could take up his concerns about what happens in Scotland with the First Minister.

Baroness Garden of Frognal: My Lords, once again, all supplementary questions have been asked and answered.

Chinese Government Sanctions on UK Citizens
 - Commons Urgent Question

The following Answer to an Urgent Question was given in the House of Commons on Tuesday 13 April.
“The Government stand in complete solidarity with those sanctioned by China. As the Prime Minister and Foreign Secretary have made clear, this action by Beijing is utterly unacceptable and unwarranted.
The House will recall that on 22 March, the UK, alongside the EU, Canada and the United States, imposed asset freezes and travel bans against four senior Chinese government officials and one entity responsible for the violations that have taken place and persist against the Uighur Muslims in Xinjiang. In response, China sanctioned nine individuals and four organisations, including Members of this House and the other place, who have criticised its record on human rights. It speaks volumes that while 30 countries are united in sanctioning those responsible for serious and systematic violations of human rights in Xinjiang, China’s response is to retaliate against those who seek to shine a light on those violations. It is fundamental to our parliamentary democracy that Members of both Houses can speak without fear or favour on matters of concern to the British people.
The Prime Minister and the Foreign Secretary have made absolutely clear the Government’s position through their public statements and on 22 March. I also summoned China’s representative in the UK to the Foreign, Commonwealth and Development Office to lodge a strong, formal protest at China’s actions. This Government have been quick to offer support to those who have been sanctioned. The Prime Minister and the Foreign Secretary held private meetings with the parliamentarians named in China’s announcement. My noble friend the Minister for Human Rights, Lord Ahmad, met other individuals and the entities that have been targeted. Through this engagement, we have provided guidance and an offer of ongoing support, including a designated FCDO point of contact and specialist briefing from relevant departments.
Just as this Government will be unbowed by China’s action, I have no doubt that Members across this House will be undeterred from raising their fully justified concerns about the situation in Xinjiang and the human rights situation in China more broadly. I applaud the parliamentarians named by China: my honourable friends the Members for East Worthing and Shoreham, for Tonbridge and Malling, for Harborough and for Wealden, my right honourable friend the Member for Chingford and Woodford Green, the noble Lord, Lord Alton, and the noble Baroness, Lady Kennedy, for the vital role they have played in drawing attention to the plight of the Uighurs and other minorities in Xinjiang.
This Government have worked with partners to build the international caucus of those willing to speak out against China’s human rights violations and increase the pressure on China to change its behaviour. We have led joint statements at the UN’s human rights bodies, most recently joined by 38 countries at the UN General Assembly Third Committee in October, and we have backed up our international action with robust domestic measures. In addition to the global human rights sanctions announced on 22 March, the Foreign Secretary announced a series of targeted measures in January to help ensure that British businesses are not complicit in human rights violations in Xinjiang. The United Kingdom will continue to work alongside its partners to send the clearest possible signal of the international community’s serious concern and our collective willingness to act to hold China to account for its gross human rights violations in the region.”

Lord Collins of Highbury: My Lords, I believe that all sides of the House stand in solidarity with the UK nationals—including Members of both Houses—who have been sanctioned by the Communist Party of China as a consequence of calling out the genocide and horrendous human rights abuses. In standing in solidarity, we must also offer support. I understand that a number of individuals have been subject to cyberattacks; can the noble Lord tell us what support we are giving on that? Is our infrastructure sufficiently resilient to any further such attacks? Can he also say why at this time the Government are reopening the two UK-China government investment forums, which were closed when Beijing introduced the Hong Kong national security law last summer?

Lord Ahmad of Wimbledon: My Lords, I agree totally with the noble Lord, Lord Collins, about our solidarity and our support for Members of both Houses of Parliament, and equally those beyond it, who have been sanctioned. Ironically, those who have stood up for human rights are having their rights suppressed for speaking out. We absolutely support them. On the specific areas the noble Lord raised about support being given to Members of both the House of Commons and the House of Lords, as well as those outside Parliament, the Prime Minister and the Foreign Secretary have met with parliamentarians who have been sanctioned by the Chinese Government. Equally, I have led on direct engagement with those individuals outside Parliament, including organisations,  who have been impacted. We have direct points of contact in the FCDO to offer them whatever support they require. There is active engagement and we are ready to support whatever concerns or issues of security, cyber or otherwise, they may have. On our trading relationship with China, no active trade agreement is currently being negotiated. On the specifics of the investment forum, if there are further details I can share with the noble Lord I will of course do so.

Lord Forsyth of Drumlean: My Lords, given that the major parties in the European Parliament have said that until sanctions against their MEPs are listed they will not ratify the EU comprehensive investment agreement with China, is it to be business as usual for us while UK parliamentarians are being sanctioned for exposing genocide in Xinjiang? Will my noble friend confirm for the record that this country would never make bilateral trade agreements with any country guilty of genocide?

Lord Ahmad of Wimbledon: My Lords, first, let me assure my noble friend that, while acknowledging that we have important trade between the UK and China, we are not currently negotiating a trade agreement with China. On the issue of genocide, which has been debated in your Lordships’ House as well as the other place, we have already made the Government’s position absolutely clear: that is a determination for the courts and there is a due process to go through before that determination is made. But I can share with my noble friend the actions we have taken, notwithstanding that issue being determined or otherwise. We have acted and led on action against China, both with direct sanctions, as we have imposed recently against senior government officials in Xinjiang, as well as in multilateral fora such as the Human Rights Council, where we have seen increased support for the United Kingdom’s position and statements.

Lord Alton of Liverpool: My Lords, the Minister will know that the Chinese Communist Party’s sanctions against parliamentarians should always be seen in the context of the harrowing evidence of genocide and human rights violations given by courageous witnesses to the All-Party Parliamentary Groups of which I am an officer. Parliamentarians must not be cowed or intimidated into silence or losing focus on those substantive issues because of sanctions. In a week in which young Joshua Wong, who has spoken in your Lordships’ House, has seen his prison sentence extended, did the Minister also see that 75 year-old Koo Sze-yiu, a pro-democracy campaigner who has already served 11 prison sentences, said when defending himself in a Hong Kong Court that he would not seek mitigation or leniency for treatment of his cancer as he fully intended to continue protesting? He said:
“The next time, I will deliberately break the National Security Law. Do not be lenient or take pity on me.”
Does not such courageous dignity demonstrate to the CCP that it has united East and West, young and old and parliamentarians from all political traditions? Was not Liu Xiaobo, who suffered at the CCP’s hands, right when he said:
“Freedom of expression is the foundation of human rights, the source of humanity and the mother of truth”?

Baroness Garden of Frognal: I remind noble Lords of the need for brevity.

Lord Ahmad of Wimbledon: My Lord, in agreeing with much of what the noble Lord said, let me assure him that we totally and utterly condemn China’s attempt to silence those highlighting human rights abuses, be they at home or abroad.

Baroness Blackstone: My Lords, I am grateful to the Government for the support they have given to those who have been sanctioned by China. It is vital that we defend the right to freedom of speech, by parliamentarians in particular but by academics and others as well. Last time the Uighurs were discussed in the House, the Minister agreed to write to me about why the head of the Communist Party in Xinjiang province, who has overseen the atrocious abuses there, was not included in the UK’s list of those sanctioned. As I have not received a letter, will he answer my question now?

Lord Ahmad of Wimbledon: My Lords, first, on the letter and the response to a specific question, I shall of course follow up on that with my officials. Without speculating on future sanctions, an evidence threshold needs to be met that is tested robustly before we apply sanctions to any given individual.

Lord Campbell of Pittenweem: My Lords, the Minister will recall that yesterday I asked him a question based on a passage at page 63 of the Integrated Review, which said:
“We will not hesitate to stand up for our values.”
Is that not exactly what our colleagues in this House and the other place have been doing, which, as a consequence, entitles them to our unanimous and unfailing support?

Lord Ahmad of Wimbledon: My Lords, I agree with the noble Lord, and that is exactly what the Government are doing.

Lord Polak: My Lords, on 23 February I said in this House that the Uighurs were calling out for justice and freedom. Our colleagues have been sanctioned by the same Chinese authorities who deny the Uighurs justice and freedom. The Minister in the other place, Nigel Adams, said yesterday:
“The Prime Minister has made it clear that freedom of parliamentarians to speak out … is fundamental”—[Official Report, Commons, 13/4/21; col. 165.]
and that the Government will stand firmly with them. So what does “standing firmly” actually mean, and how does it translate into real action against the Chinese authorities—not nice words, but real action?

Lord Ahmad of Wimbledon: My Lords, first, the solidarity that has been shown in your Lordships’ House and the other place with colleagues across both Houses and beyond reflects the unity of purpose and action in support of those who have been sanctioned. The Government are offering direct support, as I said in response to an earlier question, to all those organisations and individuals who have been sanctioned, and we will continue to do so. Because there is ambiguity in what  the sanctions actually mean for those individuals, we continue to press the Chinese authorities for that further detail.

Lord Walney: While these outrageous sanctions persist, is it not incumbent on Ministers—and, indeed, all parliamentarians—to formally suspend any co-operation in the various bilateral mechanisms that we have between parliamentarians in the UK and China, such as the people to people dialogue and the UK-China young leaders bilaterals?

Lord Ahmad of Wimbledon: My Lords, I can speak from my experience as a government Minister, and we have been very clear in calling out the human rights abuses in China. We have called out the issues within Hong Kong. However, equally, I recognise, as we do in multilateral fora, that there are issues such as the environment and conflicts such as the situation in Myanmar which require direct dialogue with the Chinese authorities, because they are part of the solution. There are many things we disagree on but, equally, we recognise the important role China continues to play in the international community.

Baroness Bennett of Manor Castle: My Lords, I declare my position as the co-chair of the All-Party Parliamentary Group on Hong Kong. The sanctions on UK citizens make it very clear that the Chinese Government are seeking to silence democratic dissent and free speech around the world. They are also doing that more and more in Hong Kong. I am sure the Minister is aware of reports of plans to criminalise any collective call to leave ballot papers blank or otherwise spoiled in internal elections. Are the Government taking any steps to make representations on this, to highlight it or take any action regarding it?

Lord Ahmad of Wimbledon: My Lords, the noble Baroness is right to raise the recent decisions taken by the Chinese authorities about the future operation of the legislative bodies within Hong Kong. She also rightly raises a number of other concerns, and I can assure her that we are raising them directly. The implications are such that the democratic right and will of the people of Hong Kong is being totally and utterly diluted and denied, and we will continue to defend that right. Let us not forget that China is also party to an agreement to protect the democratic will of the people of Hong Kong. It should stand by that international agreement. It is lodged with the UN. I assure the noble Baroness that, whether it is in international fora or directly with the Chinese, we will continue to raise that, because the rights of the people of Hong Kong matter to us all.

Baroness Garden of Frognal: My Lords, the time allowed for this Question has now elapsed, and I apologise to the noble Baroness, Lady Helic, that there was not time to take her question.
We now come to questions on a Statement made in the House of Commons on Tuesday 23 March, on the new plan for immigration. I first call the Front Bench speakers, starting with the noble Lord, Lord Rosser.

Immigration
 - Statement

The following Statement was made in the House of Commons on Wednesday 24 March.
“I wish to make a Statement on our new plan for immigration. The Government have taken back control of legal immigration by ending free movement and introducing a points-based immigration system. We are now addressing the challenge of illegal migration head-on.
I am introducing the most significant overhaul of our asylum system in decades—a new, comprehensive, fair but firm long-term plan—because while people are dying we have a responsibility to act. People are dying at sea, in lorries and in shipping containers, having put their lives in the hands of criminal gangs that facilitate illegal journeys to the UK. To stop the deaths, we must stop the trade in people that causes them.
Our society is enriched by legal immigration. We celebrate those who have come to the UK lawfully and have helped to build Britain. We always will. Since 2015, we have resettled almost 25,000 men, women and children seeking refuge from persecution across the world—more than any other EU country. We have welcomed more than 29,000 close relatives through refugee family reunion and created a pathway to citizenship to enable over 5 million people in Hong Kong to come to the UK. Nobody can say that the British public are not fair or generous when it comes to helping those in need, but the British public also recognise that for too long parts of the immigration system have been open to abuse.
At the heart of our new plan for immigration is a simple principle: fairness. Access to the UK’s asylum system should be based on need, not the ability to pay people smugglers. If someone enters the UK illegally from a safe country such as France, where they should and could have claimed asylum, they are not seeking refuge from persecution, as is the intended purpose of the asylum system; instead, they are choosing the UK as their preferred destination and they are doing so at the expense of those with nowhere else to go.
Our system is collapsing under the pressures of parallel illegal routes to asylum, facilitated by criminal smugglers. The existence of parallel routes is deeply unfair, advantaging those with the means to pay smugglers over those in desperate need. The capacity of our asylum system is not unlimited, so the presence of economic migrants, which these illegal routes introduce, limits our ability to properly support others in genuine need of protection. This is manifestly unfair to those desperately waiting to be resettled in the UK. It is not fair to the British people either, whose taxes pay for vital public services and for an asylum system that has skyrocketed in cost—it is costing over £1 billion this year.
There were more than 32,000 attempts to enter the UK illegally in 2019, with 8,500 people arriving by small boat in 2020. Of those, 87% were men and 74% were aged between 18 and 39. We should ask ourselves: where are the vulnerable women and children that this system should exist to protect? The system is becoming overwhelmed: 109,000 claims are sitting in  the asylum queue. Some 52,000 are awaiting an initial asylum decision, with almost three-quarters of those waiting a year or more. Some 42,000 failed asylum seekers have not left the country, despite having had their claim refused.
The persistent failure to enforce our laws and immigration rules, with a system that is open to gaming by economic migrants and exploitation by criminals, is eroding public trust and disadvantaging vulnerable people who need our help. That is why our new plan for immigration is driven by three fair but firm objectives: first, to increase the fairness of our system, so we can protect and support those in genuine need of asylum; secondly, to deter illegal entry into the UK, breaking the business model of people smugglers and protecting the lives of those they endanger; and, thirdly, to remove more easily from the UK those with no right to be here. Let me take each in turn.
First, we will continue to provide safe refuge to those in need, strengthening support for those arriving through safe and legal routes. People coming to the UK through resettlement routes will be granted indefinite leave to remain. They will receive more support to learn English, find work and integrate. I will also act to help those who have suffered injustices by amending British nationality law, so that members of the Windrush generation will be able to obtain British citizenship more easily.
Secondly, this plan marks a step change in our approach as we toughen our stance to deter illegal entry and the criminals who endanger life by enabling it. To get to the UK, many illegal arrivals have travelled through a safe country such as France, where they could and should have claimed asylum. We must act to reduce the pull factors of our system and disincentivise illegal entry. For the first time, whether people enter the UK legally or illegally will have an impact on how their asylum claim progresses and on their status in the UK if that claim is successful. We will deem their claim inadmissible and make every effort to remove those who enter the UK illegally having travelled through a safe country first in which they could and should have claimed asylum. Only where removal is not possible will those who have successful claims, having entered illegally, receive a new temporary protection status. This is not an automatic right to settle—they will be regularly reassessed for removal—and will include limited access to benefits and limited family reunion rights. Our tough new stance will also include: new maximum life sentences for people smugglers and facilitators; new rules to stop unscrupulous people posing as children; and strengthening enforcement powers for Border Force.
Thirdly, we will seek to rapidly remove those with no right to be here in the UK, establishing a fast-track appeals process, streamlining the appeals system and making quicker removal decisions for failed asylum seekers and dangerous foreign criminals. We will tackle the practice of meritless claims that clog up the courts with last-minute claims and appeals—a fundamental unfairness that lawyers tell me frustrates them, too—because for too long, our justice system has been gamed. Almost three-quarters of migrants in detention raised last-minute new claims, or challenges or other  issues, with over eight in 10 of these eventually being denied as valid reasons to stay in the UK. Enough is enough. Our new plan sets out a one-stop process to require all claims to be made up-front—no more endless, meritless claims to frustrate removal; no more stalling justice. Our new system will be faster and fairer and will help us better support the most vulnerable.
Our new plan builds on the work already done to take back control of our borders, building a system that upholds our reputation as a country where criminality is not rewarded, but which is a haven for those in need. There are no quick fixes or short cuts to success, but this long-term plan, pursued doggedly, will fix our broken system.
We know that Members of the Opposition would prefer a different plan—one that embraces the idea of open borders. Many of them were reluctant to end free movement, with Members opposite on record as having said that all immigration controls are racist or sexist. And to those who say we lack compassion, I simply say that while people are dying, we must act to deter these journeys, and if they do not like our plan, where is theirs?
This Government promised to take a common-sense approach to controlling immigration, legal and illegal, and we will deliver on that promise. The UK is playing its part to tackle the inhumanity of illegal migration, and today I will press for global action at the G6. I commend this Statement to the House.”

Lord Rosser: The Statement is apparently geared to what the Government describe as “illegal immigration”. In the Commons, the Home Secretary referred to “a broken system”—the Government’s words. After nearly 11 years in office, it is this Government who are responsible for the present system and its consequences, and it is time that the Government accepted their failings.
In 2010, the Government’s policy was to reduce net migration below 100,000. That policy—whether one agreed with it or not—was not implemented. We have never had an explanation from the Government as to why, nor will we have one today, because they will not wish to admit that it would have damaged our economy. It was certainly nothing to do with membership of the EU and free movement, because that was a known factor at the time when the policy was drawn up. That policy was clearly not drawn up with the intention that it would be implemented; it was simply because the Government wanted to attract headlines for sounding tough on reducing the number of people coming to this country. Time will tell whether the real purpose of this Statement falls into the same category.
We have a broken system because, over the last decade, the Government have been more interested in sounding tough to secure headlines than in addressing the broken system over which they now admit they have presided for some years and continue to preside. The Statement says that the Government’s current broken system
“limits our ability to properly support others in genuine need of protection. This is manifestly unfair to those desperately waiting to be resettled in the UK.”
It also refers to the system being overwhelmed, and to the
“persistent failure to enforce our immigration laws”.
Who exactly do the Government think is responsible for that failure which they have now recognised? The Statement also refers to the
“pathway to citizenship to enable over five million people in Hong Kong to come to the UK.”
We welcome this. Five million is somewhat larger than the 16,000 unauthorised arrivals detected in the UK in 2019 and which apparently
“limits our ability to properly support others in genuine need of protection.”
This assumes that none of the 16,000 is also in need of protection because they are fleeing war and persecution or, in the Government’s view, even worthy of protection simply because of the way in which they have reached this country.
The Hong Kong pathway is evidence of the need for safe, legal routes for those in need of refuge. Can the Government say how many of the 5 million eligible people in Hong Kong they expect to come to the UK? The policy statement says that
“an estimated 320,000 people [may] come to the UK over the next five years.”
How was that estimate arrived at and how many is it estimated may come from Hong Kong to the UK after the first five years? Can the Government also confirm that there is no restriction on the numbers of people in Hong Kong who are rightly allowed to come to the UK being able to do so?
The Statement says that, under the Government’s broken system, 109,000 claims are sitting in the asylum queue. No doubt, this is—at least in part—because the Government have allowed the share of applications receiving an initial decision within six months to fall from 87% in 2014 to just 20% in 2019. Why did the Government let that happen? Why are so many appeals successful? Are the Government going to tell us that it is all the fault of “leftie lawyers” or will they at last accept responsibility for the system which they now describe as “broken” and “collapsing”?
The Government have previously told us about pending agreements with France to stop criminal gangs involved in the terrible crime of human trafficking. What has happened to those promised agreements? The Statement is silent on that issue, though the policy statement tells us that, in 2019, 32,000 attempts to enter the UK by unauthorised groups were prevented in northern France.
The Government have previously referred to those who have arrived here through non-recognised routes being returned to the first country in which they could have sought asylum, or to another country. With which countries have the Government reached agreement to take back those seeking asylum who have arrived here through non-recognised routes? Is it their view of the provisions of international law and of the Refugee Convention that refugees fleeing war and persecution have to claim asylum in the first safe country through which they pass, and that they have no right to transit through another country to get to this country to claim asylum? Many would disagree with this stance is correct or right, but is it the Government’s position?
What safe and legal routes currently exist by which refugees, including children, can reach this country, following our departure from the EU and the ending of the Dublin arrangements? This is on top of the earlier abrupt cessation of the Dubs scheme. Is there any limit on the number of refugees who can come to the UK by safe and legal routes? If so, what is it? If there are no, or minimal, safe and legal routes, that is only going to make dangerous and unauthorised entries to this country, including through traffickers—whether by small boat, air, in the back of a lorry or a shipping container—more, not less likely.
The Government claim that, since our departure from the EU, we have control of our borders. Does that mean that implementing what is set out in the Statement is not dependent on reaching agreements with any other countries? Does claiming that we have control of our borders mean that, at all our ports of entry, the level of checks will be such that the likelihood of successful, unauthorised entry into this country is minimal?
Finally, how will success or failure of the policies set out in the Statement be judged? What will be the criteria, yardsticks and statistics against which the Government will make this assessment?

Lord Paddick: My Lords, the Statement claims to have taken back control of legal immigration by ending free movement. Not only can EU citizens continue to enter the UK without a visa, using the e-passport gates at UK airports, but rather than taking back control of legal immigration the Government have extended the use of these e-passport gates to a further seven countries. Before, citizens of those countries had to have a valid reason for entry, enough money to sustain them and evidence that they would leave again. As a result, thousands were turned away at the UK border every year. Can the Minister say what checks are now done on these visitors?
The Statement says that people are dying at sea. Is this not because safe and legal routes for genuine asylum seekers are inadequate or non-existent? How many safe and legal routes are open to genuine asylum seekers? Can the Minister explain how vulnerable people in a war zone can apply under such a scheme? What advice does she have for legitimate seekers of sanctuary in those parts of the world with no safe and legal routes to the UK?
The Statement says that the UK’s asylum system should be based on need. Yet the Government propose to set up a two-tier system, based not on need or the validity of someone’s claim but on how they got to the UK. Are the Government aware of Article 31 of the 1951 UN Convention Relating to the Status of Refugees? It states:
“The Contracting States shall not impose penalties, on account of their illegal entry or presence, on refugees... provided they present themselves without delay to the authorities and show good cause for their illegal entry or presence.”
Are the Government’s proposals to penalise those who do not use safe and legal routes—routes which do not currently exist and for which the Government have no firm plans or timetable—not in contravention of its international obligations?
The Statement talks about someone illegally entering the UK from France. Can the Minister say on which piece of legislation the Government rely when they claim that asylum seekers who travel through a safe country to get to the UK can only claim asylum in that safe country? Even if they had claimed asylum in an EU country, what mechanism will the Government use to deport them, now that the UK is no longer part of the Dublin regulation?
The Statement claims that the immigration system “is collapsing” under the pressure of asylum applications. In the early 2000s, around 100,000 people a year were claiming asylum in the UK. In 2020, it was 36,000—a reduction of almost two-thirds, despite an increase in the number of people crossing the channel in small boats. Is the reason that the system is collapsing not channel crossings but Home Office mismanagement? Is the reason for the increase in channel crossings not due to the fact that people can no longer claim asylum from outside the UK?
Can the Minister confirm how many of the 42,000 failed asylum seekers who have not left the country are in the process of appealing a Home Office decision, when, on average, 50% of those claims are usually successful? Of those who have exhausted the legal process, why has the Home Office not deported them?
This is not a common-sense approach to controlling immigration. This Statement highlights a catalogue of government failures, along with an illegal proposal to discriminate against those legally seeking sanctuary in the UK and a hollow promise to help the most vulnerable at some unspecified date in the future. The policy has thrown open the UK border to even more countries while slamming the door shut on genuine asylum seekers. I have the greatest respect for the Minister—even though she rises in an attempt to defend the indefensible.

Baroness Williams of Trafford: I thank both noble Lords for their questions. I found them quite interesting. I always find the questions of the noble Lord, Lord Paddick, interesting. However, in a funny way we agree on some of the issues, although it would not seem so on the face of it. The last question that the noble Lord asked was: why has the Home Office not deported people who have exhausted their claims? In the proposals is the idea of a one-stop process in order that people do not keep on bringing claims, including on the steps of the plane or whatever the mode of transport might be, when being returned to their country of origin. The noble Lord asked why there had been an increase in channel crossings. It is due to criminality. There is a commonality within this House and the other place that we want to stop that criminality. All that it does is feed human misery and cause deaths, quite often in the English Channel. The criminals are the only ones who profit from it.
The noble Lords, Lord Paddick and Lord Rosser, asked a totally fair question: what are the legal routes? The legal routes are not being proposed but asked about in the consultation process, in which I hope a lot of people will engage. In fact, thousands have done so already in relation to what legal and safe routes look  like. Resettlement, whereby we have given refuge to more than 45,000 people since 2010, has been an incredibly efficient way in which to get to this country from the regions really vulnerable people who need our refuge. Obviously, if someone has a visa and the situation changes while they are in this country, that is another legal route. A good example of that might be Myanmar at the moment. If there is no visa regime in place in the country of origin, people can travel to the UK to claim asylum. But, as I say, there are the three obvious routes, including resettlement, and a consultation process is under way, which will elucidate the answers for the Government to consider.
The noble Lords, Lord Rosser and Lord Paddick, talked about controlling our borders and leaving the EU. Yes, we make absolutely no bones about that. One of the reasons why the British public decided that they wanted to leave the EU was so that we could take control of our borders. The noble Lord, Lord Rosser, is right; it is not necessarily any more about numbers but about having control over who comes in and out.
The noble Lord, Lord Rosser, also talked about the BNOs. The estimate that about 320,000 people will come here is correct; there is no restriction on them. He also talked about people from war-torn countries. Of course, they are the very people we want to give refuge to. That was the origin of the resettlement scheme: so that people in Syria and the MENA region could get our refuge. We have now extended resettlement to include anywhere in the world where people might be vulnerable as a result of either persecution or war.
The noble Lord, Lord Rosser, also talked about successful appeals. That goes back, again, to the one-step process. Appeals are frustrating the whole process of giving genuine people asylum, and it is important that we do not allow gaming of the system. We want the most vulnerable to be able to avail themselves of our asylum.
The noble Lord, Lord Rosser, asked about pending agreements with France. Yes, discussions continue with EU partners and he will know that I do want to go into the details of that on the Floor of the House. He and the noble Lord, Lord Paddick, asked whether we are complying with the refugee convention. Yes, we are. On the issue of first safe country, the system was established under Dublin. It is nothing new that people who arrive in safe countries should not then seek to come to this country if, in fact, they have been given refuge in a safe country. The noble Lord, Lord Paddick, also raised the issue of inadmissibility rules. They are of long standing and existed under Dublin.
The noble Lord, Lord Rosser, talked about the abrupt cessation of the Dubs scheme. The number of people under it was based on the ability of local authorities to take asylum seekers. We made it very clear to Parliament at the time—and Parliament was in agreement—that we could not commit to bringing people here if we could not house them within local authorities.
In terms of e-gates, the noble Lord, Lord Paddick, is absolutely right. The ability to get into this country via the e-gates has been extended to include seven countries. However, if you have not signed up to the EU settlement scheme and, therefore, cannot prove your right to work or rent, your journey is very restricted  thereafter. The noble Lord asked how someone in a war zone applies. This is why I keep talking about resettlement—someone in a war zone should be picked up within our resettlement schemes. I repeat: some 45,500 people have been given refuge since 2010. The noble Lord posited that we were going to penalise people who do not use safe and legal routes. The people we really want to penalise are the people traffickers, the criminals—those who make money out of other people’s misfortune and, quite often, death.

Baroness Garden of Frognal: My Lords, we now come to the 20 minutes allocated for Back-Bench questions. There are only eight questioners, so if noble Lords exercise their normal discretion, we should be able to hear from everybody. We start with the noble Baroness, Lady Hooper.

Baroness Hooper: My Lords, we must all deplore the tragic consequences of people smuggling and recognise the need to turn the tide of illegal immigration. Looking ahead, since primary legislation will be required to implement the new plan, I ask my noble friend the Minister to expand on chapter 9 of the policy statement, concerning the consultation process that started on 24 March. She has touched on this, but can she give us some examples of the stakeholders involved and that will be involved? In particular, can she tell us whether the IMO—the International Maritime Organization—is to be included in the consultation? I think it is the only United Nations body to be based in the United Kingdom with responsibilities for security, among other things.

Baroness Williams of Trafford: I took the opportunity this morning of seeing how many people have, thus far, replied to the consultation. You can see the rolling number on the website, and it is well over 7,000 to date. As for telling my noble friend who might have replied, I could not see a list on the website. I probably cannot see that until the consultation is complete, but I will look into it for her. I take her point about that one body based in the UK and will see if I can give her any further information on that.

Bishop of Durham: I begin by declaring my interest as a trustee of Reset and a member of the RAMP Project, as in the register. The Minister knows that I have deep respect for her work, and I am extremely grateful for the co-working we have done on a range of issues over the last few years. There is much that I welcome on the refugee side in the Statement and the policy statement. However, I have some very deep concerns around the asylum side of this. I would almost divide it into one half good, one half bad. The specific question I would like to ask today is this: under the Government’s proposals, the route by which people seeking asylum arrive in the UK will be indicative of the leave they are granted and the support they receive throughout their time. What basic support package, even if less generous, will be available to those granted temporary protection for two and a half years, to ensure that they do not face destitution? How will such temporary systems enable effective integration,  which is one of the things that the Statement and the policy statement seek to achieve? I look forward to some robust discussions with the Minister in the future.

Baroness Williams of Trafford: I have been most grateful for the discussions that the right reverend Prelate and I have had on this subject, particularly around integration and community sponsorship. For all that we talk about the laudable Dubs scheme, very few people—the right reverend Prelate excepted—have made reference to this. It will integrate people into communities very quickly and smoothly; it is such a commendable scheme. I thank the Church of England, and indeed the Catholic Church, for the role they have played in it.
As for accommodation and destitution, of course we are not a country that would legislate to enable people to be made destitute, but what we seek through the consultation is quite broad. We do not want to pre-empt what the consultation might throw up. For accommodation, we have Home Office accommodation that we have used, and we have had to use temporary accommodation throughout the pandemic. I will be very interested, as I am sure the right reverend Prelate will, in what the consultation yields for us to consider.

Baroness Ludford: My Lords, if, as the Home Secretary asserts, the UK asylum system is collapsing, why is there such dysfunction in the Home Office that it cannot process an annual 20,000 to 30,000 claims—which is not overwhelming—efficiently and fairly? Is not the only outcome of penalising asylum applicants arriving irregularly—which is not illegal, so it would be a breach of the refugee convention—to create an insecure, impoverished group of vulnerable people who cannot be removed? How can that possibly help the situation?

Baroness Williams of Trafford: The answer to the second question is that criminality is what yields the worst outcome for people genuinely claiming asylum. Either they do not get here because they drown at sea, or their money gets taken from them and they are left in a very precarious position. Therefore, the safe and legal ambition of the Home Office is to try to come down hard on criminals, while also protecting people who genuinely need asylum here. The noble Baroness asks about the claims, and why we cannot process them quickly. That is exactly what we are aiming to do through our new asylum system—through the one-step process—so that people cannot bring vexatious claims time and time again, including on the steps of a plane. We will be able process people much more quickly. This House has constantly pressed me on this, and I do not disagree: why can we not deport people quickly and why can we not process claims quickly? That is precisely what is outlined in our new plans.

Baroness Verma: My Lords, does my noble friend agree that it is really time now to rethink how we spend money in countries where there is need for investment—whether in development or through the Foreign Office in relationship building—so that people do not feel desperate to leave their shores to come across dangerous channels? Maybe a real rethink needs to happen across government and all sectors involved  in supporting refugees when they do get here. For those who have come here, will my noble friend the Minister consider, rather than not helping, skilling them up so that when they are returned home they have a skill to offer in the countries they come from, are not minded to leave their countries of origin, and instead stay there and build those countries up?

Baroness Williams of Trafford: My noble friend makes two very important points. There is an assumption sometimes that asylum seekers are poor and without skills—that is absolutely not the case. Many are incredibly skilled. One of the conversations I had with the right reverend Prelate the Bishop of Durham was about how people can get straight into the immigration system should they have the skills we require. Also, on my noble friend’s point about spending money in other countries, not only is it a good idea to help people in their country of origin, many of them want to stay in their country of origin and do not want to come here. A pound spent in a country of origin is spent far more efficiently in terms of the number of people you can help.

Baroness Bennett of Manor Castle: My Lords, we should perhaps reflect on the comments just made by the Minister in the light of the cut to overseas development aid. I am sure the Minister is aware that asylum applications fell by 18% in 2020 and, in the year ending September 2020, the UK received 31,752 asylum applications from main applicants. The comparable figure for Germany is 155,000, for France 129,000, for Spain 128,000 and for Greece 81,000. Does the Minister agree that the UK is taking less than its fair share of people fleeing war and political turmoil—often related to our foreign policies—and people fleeing areas from which, during its colonial history, Britain extracted huge amounts of wealth? Perhaps the scheme has been affected by Covid-19, but are the Government looking to significantly step up the number to what might be said to be a fair share compared to other European states?
The Refugee Council briefing on this Statement, which I am sure many Members of your Lordships’ House have seen, is expressed in very careful, factual language, but it can be described only as a cry of horror about the policies contained in this Statement. I turn to just one area, that of age assessments.

Lord Parkinson of Whitley Bay: My Lords, the noble Baroness is taking a bit too long. Perhaps she would ask her question.

Baroness Bennett of Manor Castle: Okay. On age assessments, how can the Minister say that it is fair to put 18 years of age as the cut-off point when it is obvious that people coming from war zones, having grown up and spent their whole lives in them, are not going to look like 18 year-olds who have been brought up in comfortable circumstances in a safe environment?

Baroness Williams of Trafford: I will answer two of those questions. Eighteen is the cut-off age because 18 is the age of an adult, and we do not want adults sharing classrooms with young children, for  example. It is important to assess people’s ages, and we will try to do so on a more scientific basis. The noble Baroness is absolutely right that applications fell in 2020. We had a pandemic and everything fell in 2020—so did returns. I am sure that the applications will be back up this year.

Lord Dubs: In the recent past, the Government have closed down two safe and legal routes for unaccompanied child refugees to reach this country from the continent—the Dubs amendment and the provisions under the Dublin treaty. How can the Minister reconcile closing down those routes with the claim that the Government want only safe and legal routes for people to come to this country? She has made that virtually impossible. Are not the Government getting very close to saying that family reunion will depend on the method by which somebody arrived in the UK, not the merits of their case? Surely we are turning the clock back in a most retrograde manner.

Baroness Williams of Trafford: I disagree that we have closed down routes. The Dubs scheme specified a number, which was subsequently increased to 480. It was based on the ability of local authorities to take children—the noble Lord shakes his head, but he knows that. We did not close it down; we successfully completed it. As for Dublin, we left the European Union, so we were never going to continue it. As I said during the passage of the immigration Bill, all the routes would continue to be open and we are now in consultation on what our new sovereign borders and immigration system will look like.

Lord Cormack: My Lords, I hope that my noble friend will forgive me for being specific and parochial, because I am sure that she will agree that any long-term immigration policy must allow for the free movement of people who have legitimate work to do for British employers. Those who grow our fruit and flowers have this year not been able to get the regular supply of labour on which their industry depends. I am particularly mindful of south Lincolnshire. The local television programmes night after night during the Easter period showed fields of rotting daffodils. This is a tiny thing in comparison with what many of my colleagues have raised, but it is important. Can she assure me that everything will be done to ensure that a genuine free movement of labour of people who have regular jobs to do will be able to continue?

Baroness Williams of Trafford: My Lords, our new immigration system is skills-based. Free movement obviously ended under our leaving the EU. I empathise with my noble friend’s point, but the whole world is about to enter a period of economic challenge. It behoves employers in this country to employ people from this country to do the jobs needed in this country.

Baroness Garden of Frognal: Lord Forsyth of Drumlean, are you there? We have had problems contacting you.

Lord Cormack: He was there earlier. He spoke on the last Question.

Baroness Garden of Frognal: I know, but he dropped off the call. I do not think we have the noble Lord, Lord Forsyth, sadly, in which case all the supplementary questions have been asked.

Financial Services Bill
 - Report (2nd Day)

Baroness Garden of Frognal: My Lords, I will call Members to speak in the order listed. Short questions of elucidation after the Minister’s response are discouraged, but any Member wishing to ask such a question must email the clerk. The groupings are binding. A participant who might wish to press an amendment other than the lead amendment in a group to a Division must give notice in debate or by emailing the clerk. Leave should be given to withdraw amendments. When putting the question, I will collect voices in the Chamber only. If a Member taking part remotely wants their voice accounted for if the question is put, they must make that clear when speaking on the group.

Amendment 14

Lord True: Moved by Lord True
14: After Clause 35, insert the following new Clause—“Regulated activities and application of Consumer Credit Act 1974(1) This section applies on or at any time after the making of an order under section 22 of the Financial Services and Markets Act 2000, after this section comes into force, which has the effect that a relevant credit activity becomes a regulated activity for the purposes of that Act.(2) Section 107(6) of the Financial Services Act 2012 (power to make provision about the application of the Consumer Credit Act 1974) has effect as if—(a) the reference to an order of the kind mentioned in subsection (1) of that section included an order of the kind mentioned in subsection (1) of this section, and(b) the references to a transferred activity included a relevant credit activity which is the subject of an order of the kind mentioned in subsection (1) of this section.(3) “Relevant credit activity” means the activity of—(a) entering into an agreement described in article 60F(2) or (3) of the Regulated Activities Order (certain borrower-lender-supplier agreements for fixed-sum credit or running-account credit) as lender, or(b) exercising, or having the right to exercise, the lender’s rights and duties under such an agreement,so far as the activity is not a transferred activity (as defined in section 107(1) of the Financial Services Act 2012).(4) “The Regulated Activities Order” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) as it has effect on the passing of this Act.”Member’s explanatory statementSection 107(6) of the Financial Services Act 2012 provides that the Treasury may disapply provisions of the Consumer Credit Act 1974 in relation to an activity previously licensed under the 1974 Act, or exempted under specified provisions of  that Act, where the activity has become a regulated activity for the purposes of the Financial Services and Markets Act 2000. This amendment extends that power to certain other activities of lenders.

Lord True: My Lords, the Government have brought forward Amendment 14 to ensure that buy now, pay later products can be brought into scope of regulation in a way that is proportionate to the risks that they pose to consumers. As noble Lords will recall from previous debates, to which the Government listened carefully, on 2 February following the publication of the Woolard Review into the unsecured credit market, the Government announced their intention to regulate interest-free buy now, pay later products. Following that announcement, the Government have been working at pace to ensure that this can be done in a proportionate and timely manner. Amendment 14 is the next step in this process. Many noble Lords were keen to see progress on the issue, so I hope that they will welcome the amendment today.
The Government recognise the concerns that exist with these products as the market continues to grow in the United Kingdom. We are therefore acting decisively to address the risk of detriment to consumers. The Government intend to bring buy now, pay later products within the scope of the regulatory framework, which includes the application of the Consumer Credit Act 1974. However, as noble Lords have previously heard, it is important to note that those products are interest-free, and thus are inherently lower-risk than most other forms of borrowing. Used properly, they can provide a lower-cost alternative to mainstream or high-cost credit. The Government’s view is that they can therefore be a useful part of the toolkit for managing personal finances and tackling financial exclusion, a topic that I will return to later in the debate. It is therefore essential that when buy now, pay later products are brought into regulation, it is done in a way that provides robust consumer protection, while ensuring that it is viable for firms to continue to offer these products. Amendment 14 will ensure that that can be done.
Some of the provisions of the Consumer Credit Act could be disproportionate, given the short term, interest-free nature of buy now, pay later products. They could also materially impact the way in which consumers are able to access these products. As a result, this amendment seeks to provide the Government with the power to ensure that the provisions of the Consumer Credit Act 1974 that will apply to buy now, pay later products are proportionate to the risks that the products present. This will allow the Government to apply only the provisions of the Act that have been determined to be proportionate to the risks posed by buy now, pay later products.
The Government intend to publish a consultation later this spring where the views of consumers, buy now, pay later providers and the retailers that offer these products will be sought on this matter. We will carefully consider these views to inform our approach to creating a proportionate regime, including decisions on which provisions in the Consumer Credit Act should apply to buy now, pay later agreements. Following this, we will take forward the necessary secondary legislation to bring buy now, pay later agreements into  regulation. That secondary legislation will be subject to the affirmative resolution procedure, meaning that noble Lords will have the opportunity to further scrutinise and comment on the Government’s proposals. I therefore ask that your Lordships support this amendment to ensure that the regulation of buy now, pay later can proceed both at pace and in a proportionate manner. I beg to move.

Lord Holmes of Richmond: My Lords, it is a pleasure to follow the Minister. In doing so, I declare my financial services interests as set out in the register. I would like to be the first to offer my support for Amendment 14 and what it seeks to achieve. I congratulate my noble friend on the decision to use the affirmative procedure to bring these powers into force.
I will now speak to Amendment 35 in my name. The thinking behind it is quite straightforward: financial exclusion has dogged our nation for decades, ruining individual lives and putting down potential. Solutions exist and thousands of people are working so hard in this area, but we need to do more and we need more innovation: hence the two elements in Amendment 35. It seeks to give the Bank of England—our central bank—a more significant role when it comes to financial exclusion. The Bank has an enviable brand, respected right across the UK and revered around the world. This brand could be well put towards solving the problem of financial exclusion.
The first part of Amendment 35 seeks to give the Financial Policy Committee of the Bank of England an objective to monitor financial exclusion. As noble Lords know, the FPC is responsible for financial stability in the UK. I believe there are 407 billion new reasons to take this opportunity to reconsider financial stability and include financial exclusion within the remit of the FPC.
The second limb of the amendment seeks to suggest the opportunity for the Bank to offer basic bank accounts to those who find themselves financially excluded. The take-up of bank accounts for those financially excluded is not just a measure of what is currently available from retail providers. The history of those individuals also plays a key part, so, again, the brand and the central place of the Bank could play a critical role here. If we considered some of those accounts potentially being digital accounts—perhaps central bank digital currency accounts or digital pound accounts—the Bank might play a critical role in addressing digital as well as financial exclusion.
The Old Lady of Threadneedle Street could be not just lender of last resort but potentially, through Amendment 35, provider of first support for those individuals en route to financial inclusion. Provider of first support is certainly worth a thought. Does the Minister agree?

Baroness Noakes: My Lords, I shall speak only in respect of Amendment 35. My noble friend’s amendment is very well intentioned, covering financial exclusion and basic bank accounts. Despite basic bank accounts having been in existence for nearly 20 years  now, there remain problems with take-up. The know-your-customer rules, about which my noble friend Lord Holmes of Richmond raised concerns in Committee on this Bill, also make life difficult for individuals trying to access them. It is no secret that the banks regard basic bank accounts as a costly burden that they have to bear, which is probably at the heart of some of the issues.
There are two main problems with my noble friend’s amendment. First, the Financial Policy Committee is absolutely the wrong place to put anything in relation to financial exclusion. The FPC was set up in the Bank of England in relation to the Bank’s financial stability objective, as my noble friend said. It requires mental gymnastics of an extraordinary kind, however, to think that financial exclusion would ever have a significant impact—positive or negative—on the financial stability of the system as a whole. The FCA has responsibility for policies in the area of financial exclusion. That is the right place for it, because it aligns with its consumer protection objectives.
The second problem that I have with the amendment is that it asks for a report from the Treasury on progress made by the Bank of England on offering basic bank accounts. As far as I am aware, the Bank of England does not itself offer any bank accounts. In fact, I believe that it closed the last bank accounts that it offered about five years ago. I was very proud to have a Bank of England bank account, which I acquired when I was a member of court. It had an extremely grand cheque-book and I was very unhappy when the Bank of England closed the account. It did that because it was a relatively small operation, and it simply could not keep up with the online technology that one needs nowadays to make a retail offering. It closed them down and does not have the capacity to do it now, so it would be completely wrong to expect the Bank of England to step back into retail banking, having consciously stepped out of it.

Baroness Garden of Frognal: The noble Baroness, Lady Tyler of Enfield, has withdrawn, as she is speaking in Grand Committee, so I now call the noble Baroness, Lady Bennett of Manor Castle.

Baroness Bennett of Manor Castle: My Lords, I welcome the government amendment in this group. We are seeing regulations catching up with financial innovation. As ever, it seems that the regulator is being forced to chase after advances that are screaming into the future with potentially very disturbing results.
However, I chiefly wish to speak to Amendment 35, in the name of the noble Lord, Lord Holmes of Richmond, and to offer my support for it, or at least for its principles. As the noble Lord said, we are talking about innovation, but innovation that is actually for the common good—innovation that works for people, and particularly, innovation that works for the most vulnerable in our society. The figures really are deeply shocking: estimates of 1 million unbanked people; 8 million people with debt problems; 9 million people with no access to mainstream credit. One thing that is not adequately recognised is the poverty  premium: the fact that not having a bank account or access to mainstream credit means much higher costs for everything from utility bills to borrowing and very well documented impacts on health and wellbeing.
This seems like an apt time to ask the Government whether they have given further consideration to the recommendation from the Select Committee on Financial Exclusion, which reported in March 2017. It called for a Minister responsible for financial exclusion. Is this something that the Government are really going to focus on by means of this Bill? The noble Baroness, Lady Noakes, may have concerns about the structure of this, but the intentions of the noble Lord, Lord Holmes, are very clear. Are the Government going to take action?

Baroness Neville-Rolfe: My Lords, I offer a few words of caution on the subject matter of Amendment 35 in the name of my noble friend Lord Holmes of Richmond, who has done so much to promote financial and digital skills since we joined the House together in 2013. The amendment is concerned with the very real problem of the “financially excluded”, in today’s jargon. This problem is of long standing. Under the description of the poor, the New Testament informs us that “they will always be with us”, and similar quotations can be made from the Old Testament. More recently, as just mentioned by the noble Baroness, Lady Bennett, we have had good reports on the subject from our own committees.
Experience shows that another ancient saying is also relevant and helpful. I refer to the injunction on doctors when seeking to treat disease—“first do no harm”. Unfortunately, this latter injunction was not followed when the United States authorities sought to improve the lot of the financially excluded, which arguably led to the subprime crisis of 2008 in the United States, or at least made that crisis much worse than it would otherwise have been. Noble Lords will recall that, when it came to the attention of the federal authorities in the United States, some communities, called marginalised groups, received fewer house loans per head than others. The lenders concerned were threatened with prosecution under federal laws on discrimination. That was a major factor behind many subprime loans being made, which those receiving them had no real likelihood of being able to repay. Such loans were included in bundles sold to investors, which in many cases inevitably defaulted. The end result was a crisis in which some of the worst affected were those who had received the subprime loans in the first place—namely, the financially excluded, whom we are trying to help.
None of this argues against the amendment before us proposed by my noble friend Lord Holmes, although I note that my noble friend Lady Noakes has some reservations. We always need to listen to her because of her great expertise in this area. However, it shows that, in efforts to improve the lot of the financially excluded, we need to proceed with as much prudence and attention to the risks to them and more broadly, as we do in pursuing other wider objectives.

Baroness McIntosh of Pickering: My Lords, I am delighted to support government Amendment 14, and congratulate my noble friend and the ministerial  team on listening to concerns expressed across the House, and in particular, in echoing my noble friend Lord Holmes, for introducing the follow-up provisions under the affirmative procedure. I will also address, perhaps more supportively than other noble Lords, my noble friend’s Amendment 35. I must say that I am increasingly envious of my noble friend Lady Noakes and, in particular, the rather splendid account that she had previously with the Bank of England. She must be torn, not wanting to destroy her rather splendid cheque book. For security purposes, she might err on the side of caution and do so.
My noble friend Lord Holmes of Richmond has done the House a great service by raising this issue. Yes, we can debate whether it should be a Bank of England account, which I understand no longer exists; perhaps this is not the right time to revisit that. I have become increasingly concerned—as, I know, have many in consumer circles with much greater knowledge than I about this—by the way in which one’s credit score can be disadvantaged. All sorts of extraordinary things seem to be happening at the moment, without us even knowing. We are apparently encouraged to do regular credit checks; I did, and was delighted to see that on one, the Experian account, my credit score was sound. But apparently the Government have discontinued Experian, so I do not know to whom to address that in future.
This raises the issue of those who have a poor credit score and are having trouble finding a bank account. My noble friend Lord Holmes has identified the difficulties in doing so. If it is not the wish of the Government to support the terms of Amendment 35, I hope that the Minister responding to this debate will nevertheless look carefully at the circumstances by which it is becoming increasingly difficult for those with poor credit scores to access even the most basic banking services.
I understand what my noble friend Lady Noakes said about how we are coming under increasing commercial pressure to make banks’ retail services financially viable. This is causing great concern for those of us in rural areas, because it is increasingly difficult to keep small rural branches open. To me, they perform a social function as much as anything, particularly for local shops, in banking their cash, allowing them to access bank accounts and, for example, banking their money when there has been a local mart. My noble friend has identified these very real concerns and I hope that the Government look on them sympathetically.

Lord Stevenson of Balmacara: My Lords, I will speak briefly on government Amendment 14 and say a few words in support of the noble Lord, Lord Holmes, because of his ongoing campaigns and successes in making us think harder about financial inclusion and the use that could and should be made of fintech, in reaching out to those who are not provided for by the financial system. Government Amendment 14 has our support because, as seems obvious from the Woolard review and other comments, there is an issue around this new-technology approach to purchasing.
Buy now, pay later has all the ring of a scam around it although, having talked to some providers and looked at their business plans in more detail, it seems to be a  well worked-through and carefully crafted approach to the process of trying to buy goods, mainly. It may also apply to other services. Those on reasonable budgets who are unable to pay, with confidence, the amount for the goods that they are purchasing get the benefit of the opportunity to spread the payment over more than one month—the majority are for three months—largely at the expense of the retailer. The amounts are small and the sanctions applied by the providers are severe: you get dropped if you miss a payment or two.
There does not seem to be a sense of some of the fringe approaches that were available in other schemes that the House has looked at and which we have read about in the papers. In a sense, this may not be quite the scam and worry that we thought it was when the Woolard review came out, but the Government are right to ensure that the regulatory book is in order and that there is an opportunity to keep a close watch on this, and to act, as and when required.
Therefore, although it is unusual for the Opposition to offer powers to the Government in this way, we are reassured by the way that they have approached this, having brought us into the discussion and debate. We are aware that any regulations brought forward will, in practice, be under the affirmative basis and therefore open to scrutiny within your Lordships’ House and elsewhere in Parliament. We support this approach, even though to do so is slightly unusual. We think that doing it this way is a good move by the Government and hope that it will not be necessary, in the sense of some of the scare stories that we have read about. But if it is, at least the powers are banked.

Lord Naseby: This is an important Bill and I record my formal thanks to my noble friends on the Front Bench for the way that they listened to the earlier debates. Here, we have evidence in this first set of amendments, certainly Amendment 14, that not only have they listened but we are getting a positive response.
Amendment 14 is good and I support it. I am delighted to hear that we will have a consultation with stakeholders. I wonder whether Her Majesty’s Government could produce a list of those whom they think they are going to consult, because a number of us know a fair amount about the fringes of the financial world and there may be a section missing.
On buy now, pay later, I remember that when I started buying things that I could not afford there was a technique called hire purchase. That was very similar and there were all sorts of arguments when I got into politics, while HP was still active, on the nuances of the HP world. The same applies now, so I say well done on Amendment 14. I look forward to seeing the consultation and hope to take part myself. As someone who has sat in the chair, I will welcome enormously having an affirmative resolution when it comes back. I also ask my noble friend the Minister to make sure that the Financial Ombudsman Service and claims management companies fall within the circumference of this consultation, because they are important to this large market. It is buy now, pay later, in a sense, but not the modern version; it was historically called home-collected credit.
On Amendment 35, I also give credit to my noble friend Lord Holmes of Richmond, who has had a huge effect upon coming to your Lordships’ House. He has put his finger on it here, particularly with proposed new subsection (3). I suspect all noble Lords know that two dimensions are happening. First, the concept of branch banking is disappearing. I started life banking, and still do bank, with the Royal Bank of Scotland, but there is no RBS bank in Bedfordshire as far as I know, and certainly not within easy distance of Sandy, where I am sitting at the moment. I was then referred to and had my transactions covered by the National Westminster Bank, part of the RBS group, but that is no longer in Bedford either. Branches are disappearing fast. Where do I end up? It is with telephone banking in the depths of Scotland with some lady who is working from home. It is very efficient, I dare say, but it is not easy banking.
Secondly, we know that the Post Office is increasing its profile in this area. That is greatly to be welcomed, but usually around the corner from the post office, or quite often adjacent to it, are ATMs. These were an absolute godsend to most people who were not carrying out major financial transactions and who wanted cash, but now we hear complaints from those faced with financing the ATMs. That suggests that it will not be long before the banking profession says that it cannot possibly finance them and that it is making a great loss. I say to my noble friend of the Front Bench that this needs addressing, because ATMs are vital to society as we know it, whether in distant rural areas or for people who in one way or another cannot use a bank. Having said all that, I very much second my noble friend Lord Holmes’s amendment and hope that it will find favour with Her Majesty’s Government.

Baroness Kramer: My Lords, the two amendments in this group are significantly different from each other, so I am afraid that I will have to address each one separately, starting with government Amendment 14. We obviously support this step, but some comments need to be made. First, the very fact that legislation has to be passed for these financial transactions to be captured by the regulator demonstrates some of the flaws in the whole approach of using a regulatory perimeter as the mechanism for deciding which activities are regulated or not.
The buy now, pay later industry has been growing at an astonishing rate over the last several years. The largest player is Klarna, which I think was valued in its last funding round at $31 billion—three times its value six months earlier. That gives noble Lords the idea of the pace. Anybody who wants to look up buy now, pay later on the internet will find company after company. This issue has galloped away without the regulator becoming involved. It suggests to the Government that some real rethinking needs to happen, given the pace of innovation that we now see generally in finance.
Secondly, I was concerned by some of the language the Minister used when talking about this as a relatively low risk and rather benign form of financing. There is no free lunch. There is no such thing as a delayed payment that does not have an interest cost embedded in it. I understand that with buy now, pay later, it is the  retailer that pays fees to the intermediary providing the advance payment. Those costs then fall on everybody buying products from that particular company. We get to the point where you are a fool if you pay up front, because within the cost of the product is embedded an element of financing that is falling on you. If you are a bit like me, you see the price and you pay it, but I know that I am paying more than I should because I am picking up the cost of financing that has been given to other people using the buy now, pay later product. There certainly is cost embedded in all of this; it is not a free lunch.
Martin Lewis gave evidence to MPs in December, pointing out that this is a product very much targeted at the under-30s, although I know that Klarna disputes this. It is having the impact of getting them into debt. Again, I looked to a quote from Jane Clack, a money adviser at the debt advice firm PayPlan. She was talking about what had happened over the two-year period. She said:
“This form of introduction to credit … supports the ‘I want it now’ purchases of items people may not be able to afford. We have seen a worrying increase in the number of young people contacting us for free debt advice. It now makes up more than a fifth of our total client base.”
This is a mechanism that is getting a lot of young people into overpurchasing and consequently into debt. Indeed, the advertising on websites directed at retailers, encouraging them to sign up to buy now, pay later firms, tells them that the average spend will go up by 20% if they sign up to a buy now, pay later scheme because individuals feel, “My goodness, if that’s all it costs I can spend even more.” Noble Lords can see the pattern that is developing. Frankly, there is a lot of risk associated with all this, and I hope it is with that perspective that the whole consultation will go forward and regulation will be structured.
I say this because we went through the same process in this House of saying “it is largely benign” when we looked at payday lending. That was the argument made by the regulator. If this House remembers, the regulator had the power to take action in a serious way against abusive payday lenders. It showed a light touch because it saw payday lending as relatively benign. It was only when this House forced the regulator’s hand by passing regulation that required it to start using interest rate caps that that industry was brought under control. Indeed, most of the players instantly disappeared, because without the abusive part of their activities the other part could not be sustained. This issue should be taken very seriously by the regulator, which should not get caught up in the idea that this is low risk or in some way benign. I am always troubled when I hear that something is interest free. No, it is not; the interest is differently packaged.
On Amendment 35, I continue with apologies from my noble friend Lady Tyler, who is the former chair of the Lords Select Committee on Financial Exclusion. As the Deputy Speaker said, she is speaking in Grand Committee and has had to scratch here. She very much appreciates the spirit of the amendment of the noble Lord, Lord Holmes, but I will quote a sentence from the speech she wrote that I think captures the fundamental issue: “What is still missing is an overarching strategy and responsibility across government, regulators  and industry proactively to promote financial inclusion.” In a way, that is the issue that the noble Lord, Lord Holmes, is picking up and addressing and that I hear echoed in the words my noble friend would have used.
The noble Baroness, Lady Noakes, made the case that the Bank of England is really not the place to have a basic bank account, and I want to pick up on this important issue. The current high street banks that provide basic bank accounts do so, as the noble Baroness said, reluctantly. It does not make any sense in the context of their business plan, their overheads or the clientele that they want to build.
There is an important strategy that could be addressed, certainly by the PRA, along the lines of, “As a condition of your banking licence, perhaps you don’t have to provide a basic bank account, but you do need to support the civil society groups that can service this excluded community”—because that is a community that often needs a detailed helping hand. That is one of the reasons why opening a basic bank account at the Bank of England would not get people in that community very far. Typically, they are people who need particular services and particular kinds of support to become financially included, and to get the advantages that come with being financially included in our modern society.
That takes me to the issue raised by the noble Baroness, Lady Neville-Rolfe; it is a canard that needs to be captured very quickly. The Community Reinvestment Act in the United States, to which she referred, was passed in 1977. It was not a play into the sub-prime mortgage crisis. I lived in Chicago in those years, so I know that it came about as a civil rights Act, because disadvantaged communities—primarily black ethnic communities—had been literally red-lined by all the major banking players, which would take deposits from them but would never lend back to support mortgages or businesses. It was a crucial Act that completely changed the nature of financial inclusion in the United States, and it was probably one of the most important pieces of legislation there. I have always regretted that we have not picked up its themes and extended them here, because it created a layer of community banks and credit unions that serviced this community, and did so very well throughout the years of recession.
The sub-prime crisis was, on the one hand, sheer fraud—as I think the noble Baroness, Lady Neville-Rolfe, knows—and, on the other, the packaging up of fraudulent loans into portfolios against which securities were then issued on the grounds that diversification within the portfolio removed the risk. This was not a case of lending into communities in the responsible way driven forward by the Community Reinvestment Act. I hope that we will pick up the lessons of that Act, because in the United States people are not unbanked and excluded to the extent and breadth that they are here in the UK.

Lord Tunnicliffe: My Lords, the Government’s response to the Woolard Review was swift and positive. As doubts remained over exactly when and how Ministers’ promises on buy now, pay later products would be delivered, this Bill appeared to us to be the perfect vehicle—although, sadly, the Treasury initially disagreed  with that view. In Grand Committee the Minister stressed the complexity of the issue, and the need to work with the industry to get the scope of future regulation right.
Of course we agreed on the necessity for the Treasury and the FCA to get this correct, and we are realistic about the difficulty of striking the right balance. As I have said before, we would not wish forthcoming regulatory changes to impact on the availability of certain short-term payment agreements, such as for gym membership or sports season tickets, which have proved to be relatively low risk. We also recognise that there is a growing market for buy now, pay later, and that many of the people using such services experience no problems with them. Indeed, we are grateful to the providers that have engaged with us in recent weeks and shared their ideas on next steps.
In March the boss of Klarna expressed disappointment about the concerns voiced about buy now, pay later products. He said he was “emotionally upset” by comparisons with the former payday lender Wonga. I am sure that this was not aimed at your Lordships’ House, but let me be clear that we recognise the differences. However, just because two business models vary, that does not mean that we cannot and should not learn lessons from past regulatory failure. These products may not have interest charges attached to them, but that does not mean they are risk free. That was recognised by Chris Woolard in his review when he warned that there was significant risk of consumer detriment if the market continued to grow at pace without the implementation of appropriate consumer protections.
In his recent comments, Klarna’s boss acknowledged that his firm had made mistakes, particularly in relation to how it had advertised its products in the past. Such self-reflection is hugely important, and I am sure that advertising is one of the areas that will feature in the future regulatory framework.
We did not want this issue to be kicked into the long grass, particularly when the Covid-19 pandemic has seen the use of buy now, pay later grow exponentially. Again, we welcome the positive response that we have had from some lenders, who indicated enthusiasm for having regulation in place as soon as practicable. We strive to be reasonable people, so in Committee we made an offer to the Government, saying, “Even if you don’t have final answers at this stage, use this Bill to take powers that you may need going forward.”
It is rare for the Opposition to call for more delegated powers in a Bill, but on this occasion we welcome Amendment 14. We are grateful to both the Minister and Treasury officials for their engagement on this important issue. At the same time, we are conscious that the matter is not entirely closed. We look forward to further consultation and will closely follow subsequent steps taken both by the department and by the regulator. We hope that their joint efforts will crack the nut at the first attempt, but I would be grateful if the Minister could confirm what has been said in meetings—that the amendment comes with the option for tweaks further down the line should that be deemed necessary.
I will not speak at length on Amendment 35, introduced by the noble Lord, Lord Holmes of Richmond, but I hope that the Minister will be able to outline what steps are being taken to address financial exclusion. Progress has been made over the years, but too many people still find themselves unable to access basic banking products. In many senses the Government have picked the low-hanging fruit, but we must now grapple with some of the tougher cases.
My noble friend Lord Stevenson previously tabled an amendment on the concept of financial well-being, which dealt with financial inclusion along with other issues such as the accessibility of debt advice, which we discussed before the Easter break. This Bill may not be the right way to advance the concept of financial well-being, but we hope that that concept will begin to root itself in the Treasury’s thinking. If we are truly to build back better after the pandemic, we must ensure that everyone has access to basic services and financial advice, so that they can build resilience for the future.

Lord True: My Lords, nearly 190 years ago, the great Duke of Wellington came into a new House and famously commented, “I never saw so many shocking bad hats in my life.” Looking round today, I have to say that I never saw so many magnificent new haircuts in my life—and I look forward to seeing many more in the next days and weeks.
I thank all those who have contributed to the debate, on a subject that I assure noble Lords we shall continue to consider very carefully, as the noble Lord, Lord Tunnicliffe, asked. I am grateful for the general support that has been given, and the generous remarks made by the noble Lord. I am sure I speak for my noble friends the noble Earl and Lady Penn when I say how much we have appreciated the constructive engagement of Peers on all sides with this legislation. I assure the noble Lord that, through the consultation and leading forward to the affirmative instrument we have promised, we will continue to give the most careful consideration to all ideas.
For my noble friend Lord Naseby, I can again confirm that there will be a full public consultation as soon as possible after Royal Assent. That will allow input from all interested parties, as my noble friend asked.
I thank the noble Baroness, Lady Kramer, for her broad support. She criticised the product, albeit that it is a lower risk than some other types of credit. We certainly agree that a proportionate approach to regulation is the right goal, and that is what I set out. The Government are engaging with stakeholders and will, as I say, consult in the spring to ensure that regulation provides the appropriate degree of consumer protection. I assure the noble Baroness that the Government are not complacent. Indeed, that is why we are taking action and are open to continuing consideration and discussion on this matter. All in all, I am very grateful for the response from your Lordships to government Amendment 14.
I will now address the second amendment in the group, Amendment 35, from my noble friend Lord Holmes of Richmond. I join others in paying tribute to his indefatigable work in this regard, which  we all so much admire. His amendment similarly deals with products that aim at increasing financial inclusion.
Amendment 35 would make the Financial Policy Committee of the Bank of England responsible for monitoring financial exclusion and reporting on progress on offering basic bank accounts to financially excluded individuals. The Financial Policy Committee has responsibility for addressing systemic risks and protecting and enhancing the resilience of the UK financial system. As my noble friend Lady Noakes has argued, I am afraid the Government do not believe it is an appropriate body for this task. By the way, I hope no one listening to our debates will draw from the fact that the Bank took away my noble friend’s cheque book any conclusion about her creditworthiness, nor indeed start a run on the Bank of England. It is a question of principle, and we do not believe the body is appropriate.
However, I reiterate that reducing financial exclusion remains a key priority for the Government and one we continue to drive forward. I think we in this debate are all agreed on that, albeit with due caution, as expressed by my noble friend Lady Neville-Rolfe and others. We are committed to ensuring that everyone can have access to useful and affordable financial products and services. This has also been a particularly important part of our work during the pandemic.
Noble Lords asked for examples. One way we are doing this is through the biannual Financial Inclusion Policy Forum, of which the Economic Secretary is co-chair. Just a few months ago, in November, the Treasury published its latest annual Financial Inclusion Report for 2019-20. It sets out all the recent work on financial inclusion. Not only this, but the Treasury’s Basic Bank Accounts report came out in January this year.
Access to a bank account is the first step on the path to financial inclusion and capability. Basic bank accounts are an important product and allow those who are financially excluded in the United Kingdom to access mainstream banking services, providing people with a way to receive their income and manage their money securely and confidently. To my noble friend Lady McIntosh, I can say that this includes those with low credit scores.
In 2014 the Government negotiated a voluntary agreement with the banking industry on the establishment of basic bank accounts, in which industry agreed to the publication of basic bank account data. Indeed, since 2016 the Treasury has published data on basic bank accounts annually, including data on firms’ basic bank account market shares. We have made progress on this issue. The most recent report shows that, as of June 2020, there were 7.2 million basic bank accounts open in the United Kingdom.
I do not in any way underestimate the importance of the points put forward by my noble friend Lord Holmes of Richmond, but the Government are confident that Amendment 35 as drafted would not do more than what the Government are already doing to tackle financial exclusion or to monitor financial inclusion and report progress on basic bank accounts. Though we admire its intent, it bears a significant risk of duplication of effort, and the Government therefore  cannot accept it. Having listened carefully and undertaken to continue to listen carefully to my noble friend, I ask him not to press his amendment.
Amendment 14 agreed.

Baroness Fookes: We now come to the group consisting of Amendment 14A. Anyone wishing to press this amendment to a Division must make that clear in debate.

Amendment 14A

Baroness Penn: Moved by Baroness Penn
14A: After Clause 36, insert the following new Clause—“Retention of personal data under the Market Abuse RegulationIn Article 28 of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (data protection), omit “Personal data is to be retained for a maximum period of five years.””Member’s explanatory statementThis amendment removes the prohibition, under the Market Abuse Regulation, on retaining personal data for more than five years.

Baroness Penn: My Lords, Amendment 14A makes a minor change to the market abuse regulation to ensure that the Financial Conduct Authority is able to continue to effectively identify, investigate and prosecute complex cases of market abuse.
The market abuse regulation, commonly known as MAR, aims to increase market integrity and investor protection, which enhances the attractiveness of the UK market for investors. It contains prohibitions on insider dealing, unlawful disclosure of inside information and market manipulation, and provisions to enable the FCA to identify, investigate and take action against such market abuse.
Article 28 of MAR provides that personal data collected for the purposes of MAR is to be retained for a maximum period of five years. The market abuse regulation was introduced as an EU regulation in 2014 and so forms part of retained EU law in the UK following our withdrawal. Article 28 applied from July 2016 and so, without this amendment, from July 2021 the FCA would be obliged to begin deleting five year-old personal data collected under the regulation.
This requirement in MAR is inconsistent with other references to data protection in EU financial services regulation and the approach to personal data retention in data protection regulation, particularly the general data protection regulation, or GDPR. An obligation to delete personal data after five years would cause problems for the FCA when carrying out its market monitoring and enforcement duties.
The FCA needs to retain personal data for longer than five years for three reasons: first, to investigate complex market abuse such as that carried out by organised criminal groups, which can typically occur over a prolonged period of time; secondly, to prosecute those complex cases—prosecutions will draw on evidence from longer than five years ago; and, finally, to enable the FCA to discharge its disclosure duties in prosecution cases by providing relevant information to the defendants that may support their case.
In some cases, the obligation to delete personal data after five years could obstruct the FCA and prevent it carrying out investigations and commencing prosecutions. This is of particular concern when it comes to preventing, investigating and prosecuting complex market abuse undertaken by organised crime groups, which can often take place over five years. For example, in a well-publicised recent case a conviction of insider dealing was confirmed on appeal in December 2020, resulting in custodial sentences and £3.9 million in confiscation. During the 2020 appellate proceedings, the FCA had to disclose information from 2013. The conviction may not have been secured if the FCA had been forced to delete the personal data relating to the case.
The Government therefore consider that it is appropriate to remove the requirement in MAR to delete personal data after five years. If it is removed, the FCA will be required to adopt a GDPR-compliant retention policy for data collected under MAR, consistent with its treatment of personal data collected for other regulatory, compliance and operational purposes. This will enable the FCA to keep personal data so long as it is necessary for the enforcement of MAR, including identifying, investigating and then prosecuting these cases of complex market abuse.
I recognise that this amendment has been tabled at a late stage of the Bill, and it would have been preferable to include it earlier. After such a large body of EU legislation was transferred to the UK statute book at the end of the transition period, the Government have been working closely with the FCA to identify any issues. This issue was identified as one that requires urgent attention to ensure the FCA is able to effectively pursue its investigations into potentially criminal conduct.
I know that the importance of investigation and addressing potential market abuse was raised by many noble Lords during debates in Grand Committee. I therefore ask that noble Lords support this amendment to ensure that the FCA is not prevented from using personal data that would support it in identifying, investigating and prosecuting cases of market abuse. I beg to move.

Baroness Fookes: I understand that the noble Lord, Lord Stevenson of Balmacara, has withdrawn, so I call the noble Baroness, Lady Kramer.

Baroness Kramer: My Lords, we do not oppose this amendment, particularly as we have the safeguard of the GDPR in place. However, I want to make one comment. One of our major frustrations with the regulator is how slow it has been to pick up on issues—how much information seems to have come its way that there is wrongdoing, yet all its actions seem to be delayed. We went through example after example of that in Grand Committee, Blackmore and London Capital being just two of the latest examples, and I think I have even missed two more scandals that have occurred in the last couple of weeks. I hope there are some other ways in which we can put pressure on the regulator to act and to do so in a more timely manner,  and that it will not see this extension as an opportunity to relax and allow more time to pass before it begins to take action when it is needed.

Lord Eatwell: My Lords, this seems to be an entirely sensible modification of an overly restrictive time limit on prosecutions for market abuse, and the Minister has certainly made a strong case.
I have one question associated with the Government’s note that accompanied the amendment. The Government stated that they had not found any clear rationale for the five-year limit applying in EU law and could see no reason for maintaining it in UK law. They said they understood that it had also been raised as an issue by EU regulators and they were considering a change to their law. Given that the EU is also considering a change, why have the UK Government not co-ordinated the change in our law with theirs? Is it not the Government’s “go it alone” approach that has been so damaging in the quest for equivalence? Could the Minister outline how the Government’s current stance on this change fits with the Memoranda of Understanding on trade in financial services with the EU?

Baroness Penn: My Lords, I thank noble Lords for their remarks in support of the amendment. As I have said, I recognise that the amendment has been tabled at a late stage of the Bill and that it would have been preferable to have included it earlier. However, as it seems the House agrees it is important that the FCA is able to effectively pursue its investigations into potentially criminal conduct, it is right that we make this minor change to ensure that it can continue to effectively identify, investigate and prosecute complex cases of market abuse. I reassure the noble Baroness, Lady Kramer, that this will not be seen as an opportunity by the FCA to take its foot off the pedal in such cases, but where it is undertaking this work it is essential that it is able to continue if the case spans a period of longer than five years.
To the question asked by the noble Lord, Lord Eatwell, the Government are committed to co-operation with the EU but it is now responsible for its own law and is aware of this issue and we are responsible for ours. As I set out in my opening remarks, without action now in this Bill the time limit would come to bite in July this year, and there is therefore an urgency with which we need to act. While we will continue to co-operate with the EU, it is right that we take this opportunity to address what we view as an unnecessary restriction on the retention of data.
Amendment 14A agreed.

Amendment 15

Lord Sharkey: Moved by Lord Sharkey
15: After Clause 40, insert the following new Clause—“Access to Sharia-compliant financial services including student finance(1) Within six months of the passing of this Act, the Treasury must make provision by regulations to facilitate the availability of Sharia-compliant financial services in the United Kingdom, including availability to students who are eligible for the Government’s student finance provision of Sharia-compliant finance products  for paying tuition fees and for student maintenance on equitable terms with students accessing the Government’s student finance provision.(2) Regulations under this section are subject to the negative procedure.”

Lord Sharkey: My Lords, Amendment 15 is in my name and those of my noble friends Lady Sheehan and Lady Kramer, and I am grateful for their support.
The amendment addresses the issue of the provision of sharia-compliant student finance, of which there is none. Because Islam forbids interest-bearing loans, that prohibition is a barrier to our Muslim students going on to attend our universities. We debated this extensively in Grand Committee so I will not rehearse the arguments in detail, but I will remind the House of the timescale involved.
The problem became clear in 2012 when tuition fees were significantly increased, and it became worse when maintenance grants were replaced by maintenance loans. In 2014, the Government published their report on the consultation that they had undertaken. That consultation had attracted 20,000 respondents, a record at the time. The Government acknowledged that the lack of an alternative financial product to conventional student loans was a matter of major concern to many Muslims. The report also identified a solution: a takaful, a well-known and frequently used non-interest-bearing Muslim financial product. The Government explicitly supported the introduction of such a product.
That was seven years ago. There is still no sharia-compliant student finance available, nor have the Government ever offered a detailed reason for this long delay or indicated when it might come to an end. As I mentioned in Grand Committee, I have repeatedly asked the Government the reasons for this lack of action. I have never had a substantive response. There was no substantive response from the Minister in Grand Committee a month ago and no explanation for the delay nor any indication of a date by which the takaful would be available. There was absolutely no sense of urgency. It was as though the plight of these Muslim students was not really important or worth taking seriously.
I made the point that I had written to the Minister on 4 January this year asking for a report on progress and making some suggestions. There had been no response by then, and there was no response until 5.15 pm yesterday evening, 14 weeks after my email. The Minister of State for Universities apologised for the three-month delay without offering an excuse or an explanation and her reply was completely formulaic, containing no substantive answers. It contained no indication of when sharia-compliant student finance would be available. I was struck by the casual contempt for our Muslim community that this response so clearly signalled—an absurdly unfriendly and unfeeling response with no attempt to reassure or comfort the Muslim community. In fact, if you look at the Government’s record on all this, it is very hard to see it as anything other than discrimination against our Muslim community—not just discrimination but a failure to engage and to explain.
Our amendment would oblige the Government at last to fulfil the promise they made to the Muslim community in 2013. It would oblige the Secretary of  State to facilitate the availability of Sharia-compliant financial services for students who are eligible for conventional student finance on equitable terms with students accessing these conventional products, and to do so within six months of the passing of this Act so that the next Muslim student cohort did not have to face a conflict between faith and education.
I very much hope that when the Minister responds he will be able to do better than Minister Donelan. I hope he will be able to tell the House when the Government will introduce the sharia-compliant student financial product. I hope he will set a date that will allow the next cohort of devout young Muslims to go on to university. If the Minister cannot do that—if he cannot say when he will fulfil his Government’s 8 year-old promise to our Muslim community—I will seek to test the opinion of the House. I beg to move.

Baroness Fookes: My Lords, the noble Lord, Lord Stevenson of Balmacara, has withdrawn so I call the noble Baroness, Lady Sheehan.

Baroness Sheehan: My Lords, I rise to speak in support of Amendment 15 in my name and those of my noble friends Lord Sharkey and Lady Kramer. I felt it only right and the very least that I could do, as the only Muslim speaking in debates on this Bill, to thank my noble friend Lord Sharkey for his determined resolve to ensure that all students, including devout Muslims, can access finance in order to go to university.
Parents who think that it is haram—forbidden—to take out an interest-bearing loan will try to save money to pay for their children to go to university. This has become inordinately expensive and, in many cases, unachievable now, in these financially straitened times. An important point to raise here is that boys will be favoured over girls when money is tight. Access to sharia-compliant student finance will make it easier for all bright boys, and girls, to access higher education.
I note the 2014 BIS consultation—which, as my noble friend Lord Sharkey said, had a remarkable 20,000 responses—and the subsequent report, which identified takaful as a suitable, frequently used non-interest-bearing sharia-compliant financial product. In its response to the report, the Government accepted its findings and put forward an alternative finance product based on the takaful model, which would, in the interests of equity, be available to everyone. It was designed so that repayment after graduation and debt levels must be identical to those of a traditional loan, with all repayments to be made directly through the UK tax system. In addition, the alternative finance product must be applied for in the same way as a traditional loan, through the Student Loans Company.
That was six and a half years ago. The enabling legislation has been implemented in the Higher Education and Research Act 2017, but, since then, there has been no further action. In the meantime, a sharia-compliant version of Help to Buy took only five or six months to launch, from start to finish—so the delay in offering a similar scheme to students is quite inexplicable. I hope that the Minister will be able to give categoric assurance that there will be no further delay. In the absence of such assurance, I would be pleased to support my noble friend Lord Sharkey, should he seek a Division.

Baroness Kramer: My Lords, I will be very brief. In Grand Committee I gave a precis of some of the experiences of would-be students who had been deterred from going on to higher education or who had done so but then had to limit their life and activities as students because every single penny was hard to come by. As a consequence, they really did not benefit from so much of what is on offer in higher education.
I do not think that I can add anything to the incredibly powerful words of my colleagues, my noble friends Lord Sharkey and Lady Sheehan. I completely support the action that they contemplate but do so in the great hope that the Government will now make a statement that will make it unnecessary for the House to divide.

Lord Tunnicliffe: My Lords, I am grateful to the noble Lord, Lord Sharkey, for moving this amendment, with support from my noble friends. As I noted in Grand Committee, the Labour Party has long supported facilitating access to sharia-compliant financial services, and we therefore backed previous powers for the Government to act on the provision of appropriate forms of student finance.
As outlined both in Grand Committee and again today, the wait for the introduction of sharia-compliant finance products has been lengthy. I will not repeat the timeline cited by others but will say that we were unconvinced by the Minister’s response to the earlier amendments of the noble Lord, Lord Sharkey. Of course, we accept that there is complexity involved, but, in my experience, such challenges can be overcome when there is genuine ambition to find a solution.
The Minister previously said that the Department for Education is faced with designing a system in which students
“do not receive any advantage nor suffer any disadvantage through applying for alternative student finance.”—[Official Report, 8/3/21; col. 558GC.]
That is indeed a challenge, but it is one that I am sure can be met.
If we view the matter from a different perspective, what bigger disadvantage could there be than a certain subset of the student population feeling, at worst, unable to attend university or, at best, deeply uncomfortable about how they finance their degree? The Government have said that faith should not be an obstacle to how people live their daily lives, so why does this specific hurdle remain?
What we need from the Minister today is not a long list of stakeholder engagement exercises but a very clear signal from the Government that they understand the urgency of getting these products launched. We do not want half-hearted promises or references to upcoming reports but rather, a clear demonstration that the job will be done within an acceptable timeframe.

Lord True: My Lords, I am grateful to all those who have spoken in this short debate. As has been said, Amendment 15 seeks to require the Government to make regulations to facilitate the  availability of sharia-compliant financial services in the UK, including a sharia-compliant student finance product, within six months of the passing of the Bill.
Institutions across the United Kingdom have been providing sharia-compliant financial services for nearly 40 years, and the United Kingdom is the leading western centre for Islamic finance. I do not believe that anyone would dispute that the United Kingdom is a world leader in this area. This Government continue to promote the growth of this sector, supporting domestic financial inclusion and our connections with key markets abroad. With respect, I think that, in this context, the charges from the noble Lord, Lord Sharkey, of “casual contempt” for the Muslim community and of discrimination were a little misplaced.
Student finance is not regulated by the FCA. I did, however, listen very carefully and respectfully to the noble Baroness, Lady Sheehan, who spoke from a position of personal commitment. I can assure the noble Baroness and the noble Lords that the Government wish to extend the reach of the student finance system so that everyone with the ability to benefit from higher education can do so. That is why we have legislated to make a system of alternative payments that is compatible with Islamic finance principles possible.
As I said in my remarks in Committee, a range of complex policy, legal and systemic issues need to be resolved before a Sharia-compatible product can be launched. Despite these challenges, the Department for Education has been working with specialist advisers to establish an appropriate product specification that meets the requirements of Islamic finance.
I also heard the concerns raised in Committee, and by the noble Lord, Lord Sharkey, again today, that it is not clear enough when the Government will take the next step. Since Committee, when I was concerned to hear those criticisms, I have discussed the matter with the relevant Minister in the Department for Education. Based on this, I can report that this matter is being considered as part of the wider review of post-18 education and funding.
I hope, therefore, that noble Lords will appreciate that it is not the right time to act until the wider strategy on post-18 education has been settled. I appreciate that some noble Lords, including those who have spoken, would like to see faster progress here—the question of when was put. I am able to reassure the House that there will be an update on this work as part of the review of post-18 education and funding when it is published, which will be at the next multi-year spending review. The Government will conduct the next spending review later this year. Further details on the nature of that spending review will be set out in due course.
On that basis, and with the commitment to progress as part of the review, I hope that the noble Lord will accept the assurance that the Government are committed to making progress on this very important issue and feel able to withdraw his amendment.

Lord Sharkey: I thank all noble Lords who have spoken in this brief debate and I thank the Minister for his response. I point out, however, that we legislated to take powers to do this four years ago.  Nothing has happened since. I remind the Minister, too, that the Help to Buy system was up and running within five or six months—and that was Islamic finance.
I also note that references to the post-18 education review seem to me—and have always seemed to me, as I said in my letter to the Minister, to which I did not get a response—completely irrelevant. We want students, Muslim or not, to be treated equally. If there is a change, after the post-18 Augar review, to the way that student finance happens, it should apply to Muslim and non-Muslim students equally: there should be no need to wait to establish the principle that Muslim and non-Muslim students should have equal access to finance. There is no need to wait.
I note, finally, that the promise of an update is not a promise to do anything at all, and does not even come close to setting a date by which these cohorts of Muslim students can gain access to finance and go on to university. In the Minister’s response there was no promise and no clarity, just talk of commitment. But after 13 years of this promise, talk of commitment is not enough, and I wish to test the opinion of the House.
Ayes 249, Noes 279.

Division conducted remotely on Amendment 15
Amendment 15 disagreed.

Baroness McIntosh of Hudnall: My Lords, we come now to the group beginning with Amendment 16. Anyone wishing to press this or anything else in the group to a Division must make that clear during the debate.

Amendment 16

Baroness Meacher: Moved by Baroness Meacher
16: After Clause 40, insert the following new Clause—“Regulation of bailiffs and bailiff firms for the purpose of taking control of goodsIn section 22 of the Financial Services and Markets Act 2000 (regulated activities), after subsection (1B) insert—“(1C) An activity is a regulated activity for the purposes of this Act if it is an activity described by Part 3 of the Tribunal, Courts and Enforcement Act 2007 (enforcement by taking control of goods) performed as a service by way of business specified in an order that may include provisions in respect of—(a) defining the people, organisations and activities under Part 3 of the Tribunal, Courts and Enforcement Act 2007 which may or may not be regulated under this section;(b) delegating some or all of the functions of the FCA in respect of this regulated activity to another person or body, either existing or established by an order under this section;(c) setting out which parts of this Act may or may not apply in respect of activities regulated by this section;(d) making such supplemental provisions as necessary to carry out the functions of the regulator.(1D) If an order under subsection (1C) has not commenced within 2 years of the passing of the Financial Services Act 2021, an activity of the type described in subsection (1C) is to be a regulated activity notwithstanding the lack of an order under subsection (1C).””

Baroness Meacher: My Lords, I thank the noble Baroness, Lady Morgan, the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Stevenson, for putting their names to this amendment and for their tremendous support throughout the discussions we have had since.
Perhaps, I should begin by reminding the House what this amendment is all about, although I do not intend to repeat what I said in Committee. For many years, I have been aware of grave concerns about the operations of some bailiffs and certain bailiff companies, and the appalling experiences of some vulnerable individuals when they find themselves in debt and need help to solve their problems. I recognise that the law must support creditors in order to recover money owed; however, there has been inadequate protection of vulnerable people in financial difficulty.
I think the Government recognise that the 2014 regulations have failed to incentivise affordable repayment and to ensure consistently fair treatment of people in vulnerable situations. The MoJ review of the bailiff issue, set up in 2018, was most welcome but we are now in 2021 and, sadly, the review has not yet reported.  Amendment 16 seeks to break the impasse on this issue, and I pay tribute to the Centre for Social Justice and the enforcement oversight working group for the support they have provided.
It is a remarkable first that the leaders of the enforcement and debt advice sectors have come together as part of this group, with the CSJ, to design a new oversight body for the enforcement industry. This cross-sector initiative is an important and historic breakthrough, and the group has made significant progress in developing the principles, objectives and functions of the new body, the enforcement conduct authority.
Crucial to the effect of an enforcement industry regulator is some statutory underpinning, as I know the Minister knows we feel strongly. Our amendment is designed to focus minds and take forward that vital element. All sides agree on the importance of giving the body real authority and teeth. I want to thank the noble Lord, Lord Wolfson, his colleagues and the noble Lord, Lord True, for our helpful meetings, the second meeting in particular. I also thank the Treasury and the Ministry of Justice for their constructive response to this amendment, and their commitment to build on the good faith of the industry and the advice sector and to work with the group on independent regulation.
I know that Ministers welcome the EOWG’s initiative; however, we accept the Treasury’s view that the Financial Services Bill is not the ideal vehicle for this amendment. We have also heard concerns from Ministers about putting this body on a statutory footing. I want to address that important point in a moment, but first, I want to assure Ministers that I will not be taking the amendment forward at Third Reading. We have listened to concerns about the FCA backstop, and I would be very happy to for the Government to come forward with an alternative amendment, maybe to another Bill, that removes the offending article.
I would also like to reflect briefly on how this initiative fits with the progress the Government have made in Clause 34—on the debt respite scheme—in improving protections for people in financial difficulty. This House strongly welcomed the Government’s initiative in 2018 to lay the powers for breathing space in statute through the Financial Guidance and Claims Act. It will not have passed Ministers by that they were pleased to do this before the policy framework was fully worked out, which is what we want to happen in relation to the regulator.
Let me now turn to the vital need for statutory underpinning for a new regulator. We are now two and a half years into the Government’s review of bailiff regulation, and my hope is that our amendment will have helped to focus minds on an idea whose time has come. Colleagues from across the House and across the sector are strongly united in the view that the current situation is unacceptable. We also believe that the establishment of an enforcement industry regulator without any statutory underpinning would be totally inadequate. I want to set out the reasons why statutory underpinning is so important for this industry. The enforcement industry itself is saying that statutory underpinning is essential, which should surely be sufficient proof of the veracity of this crucial point. The whole  point of this initiative is to constrain the activity of offending bailiffs and bailiff companies and improve practices to a universally high standard. The EOWG has recognised that this will be much hindered without statutory oversight. Any new regulator will lack the necessary powers to achieve effective regulation without this statutory support.
I appreciate that time has been short for Ministers to consider the initiative for this Bill, but I urge the Government to reflect on what industry leaders are saying and think again. The powers to enforce firms’ compliance with regulatory standards and to sanction firms and agents who are in breach of the standards—or prohibit them from operating—are essential to protect the public from the inappropriate practices we still see. Without statutory underpinning, the independent authority of any new enforcement industry regulator threatens to be undermined. Funding for the body; access to intelligence; acceptance of standards and decisions: these all continue to be heavily dependent on voluntary consent and compliance, which is very difficult to achieve in this industry. Ministers may say, “Let’s see how voluntary regulation works”—in fact, I think that is what they are saying. I am afraid that argument does not hold water, for the reasons I have set out.
Finally, it is worth noting the strong precedent for statutory underpinning in the Ministry of Justice and Treasury spheres. To take one example, the Legal Services Act 2007 provided for the Legal Services Board to oversee approved regulators and established an independent complaints body. Given the extraordinary and necessarily intrusive powers of the enforcement sector, there is an overwhelming case for a regulator backed by statute.
To conclude, this amendment would put in place the necessary framework for the Government to make a real breakthrough to resolve a long-standing issue. The amendment has cross-sector, cross-party support; this has nothing to do with politics. All sides agree that any new body requires statutory underpinning to be effective. It is crucial that this moment of opportunity is not squandered, and I really mean a moment of opportunity. Leaders of the industry may change in a few years and we would have lost that opportunity.
I have no wish to test the will of the House on my amendment. We have listened to Ministers about having a more palliative legislative option. The Police, Crime, Sentencing and Courts Bill is coming down the track and we believe that it may offer a more suitable vehicle for reform of the enforcement industry regulatory system. However, I hope that the Minister, in winding up, will assure the House that the Treasury and the Ministry of Justice will work together with the EOWG on the necessary statutory underpinning for an enforcement industry regulator. I ask Ministers to commit now to using the PCSC Bill to build on the talks we have had on this Bill and returning to the House with their own amendment on this issue. I know colleagues will listen to the remarks of the Minister very carefully before deciding whether any further Back-Bench parliamentary involvement is needed. I beg to move.

Lord Leigh of Hurley: My Lords, I congratulate my noble friend the Minister on Amendment 14, as I raised that issue at Second Reading and it was very good to see it today. It shows that the Government are listening, which is very welcome. I thank him for his kind opening remarks on a number of Peers’ appearances: it was very perceptive of him. I will not repeat the sorry tale that he heard last time around, which is the reason for this amendment. He will recall that it was in response to an attempt to commit a fraud by sending me a credit card I had not requested, and that I was unable to progress matters with FOS because I was not a customer of the credit card company concerned. I had a letter from FOS, which says the following:
“The Financial Ombudsman Service must follow the rules stipulated by the Financial Conduct Authority handbook. The relevant section concerns dispute resolution—DISP—and DISP states that there are limitations to when FOS may investigate a complaint.”
This is the rule that stipulates that FOS may look at complaints only from “an eligible complainant”, and DISP 2.7.3 states:
“An eligible complainant must be a person that is … a consumer”.
The regulations go on to say that FOS may investigate a complaint from a consumer or “a potential consumer”, and that this consumer or potential consumer must have a relationship with the regulated busines. There is a full explanation set out in DISP 2.7.3 and 2.7.6 of the FCA handbook. As I did not genuinely attempt to make a credit application, I did not fit the description of consumer or potential consumer in the handbook. In his reply to me at Second Reading, the Minister said that
“it is already the case that potential customers of a firm can seek redress through the FOS scheme under the FCA’s existing rules, notably the FCA dispute resolution handbook rule. The relevant rule states that, to be an eligible complainant, a consumer must be, or have previously been, a potential customer, payment service user or electronic money holder of the firm that they are raising a complaint against”.—[Official Report, 8/3/21; col. GC 552.]
This is completely contrary to the email sent by FOS, and there is clearly misunderstanding and confusion.
My noble friend the Minister was kind enough to suggest that I could report this matter to Action Fraud, and reports received by Action Fraud are then considered by the National Fraud Intelligence Bureau. Frankly, none of that need have been necessary or would be necessary in future if my Amendment 26, the only amendment I will speak to, were adopted. I seek for it to be adopted so that, from here on in, FOS can take action against credit card companies which do not seek to verify recipients of credit cards before they are sent out. At the moment, there is no redress for anyone who receives a credit card and no one for them to complain to. I do not think they can complain to Action Fraud because the fraud was never consummated, as it were. I very much look forward to listening to his remarks at the Dispatch Box later this afternoon, given that the Government are in listening and action mode.

Bishop of St Albans: My Lords, I shall speak to Amendment 16 and then address my own Amendment 27. The introduction of a regulatory body to oversee the rules governing the behaviour of  bailiffs would greatly strengthen complaints handling for the victims of practices that fall outside the national guidelines. The FCA reported in its Financial Lives 2020 Survey that 3.8 million people in the UK are currently experiencing “financial difficulty”. It is a terrible situation that takes a significant toll on people’s health and relationships. This amendment seeks to address an important concern: the fair treatment of people by enforcement agents who collect debts, often from vulnerable people who are in grave financial distress.
The absence of an independent regulator means that, when breaches of national standards occur, any complaints will be dealt with through the company or a trade association, before possibly being passed on to an ombudsman. This is an arduous process that prevents complaints from being adequately actioned. Furthermore, these national standards are not legally binding, which obscures the extent to which an individual can seek redress. No industry is exempt from poor practice. While most enforcement agents will probably abide by national standards, nevertheless we need to make sure that they are properly regulated.
Breaches do occur, and I will quote one example provided by the charity Christians Against Poverty of a single mother of two children. This woman was living under police protection and was a regular at a food bank, and her abusive former partner had taken out £20,000-worth of debt in her name. All of this was compounded by the fact that she was caring for her critically ill mother. When visited by a bailiff on account of a parking fine that had escalated, she attempted to contact CAP so that it could explain the situation to the bailiff. At this point the bailiff became intimidating, aggressive and threatening. That is a breach of rule 21 of the national guidelines, which states:
“Enforcement agents must not act in a threatening manner when visiting the debtor”.
We need to get a balance of powers that allows enforcement officers to undertake their tasks while also protecting debtors and ensuring they have significant mechanisms to air complaints impartially and without fear.
Debt charities are already reporting rising numbers of people in financial crisis and behind on household bills such as rent and council tax because of the Covid pandemic. Given the possible upturn in the number of individuals being referred to bailiffs in the near future, now is a suitable time to explore how we can introduce a regulatory body. I hope the Government will look closely at the content of this amendment and work to correct the current imbalance.
I now turn to Amendment 27 in my name. I am grateful to the noble Lord, Lord Sikka, and the noble Baroness, Lady Bennett of Manor Castle, who have also signed it. I tabled this amendment because I believe in the positive difference that gambling blockers can make in reducing gambling harms and empowering individuals to control their own addictions. The amendment would mandate the providers of debit and credit accounts to offer opt-in gambling blockers to block gambling transactions.
As things stand, gambling blockers have widened coverage over the past three years, currently reaching around 90% of current accounts and 40% of credit card accounts. This is an achievement in its own right and should be welcomed as a positive technological aid to reduce problem gambling. While there is a still a need to close that 10% in debit card coverage, the majority of which will come from smaller banks and building societies, it is of secondary concern to the far larger gap that exists in the credit account market, where 60% of accounts are not covered by blocking options.
In April 2020, the Gambling Commission banned the use of credit cards for gambling purposes, but this is only enforceable on licensed operators. The lack of gambling blockers on credit accounts is particularly problematic as it can provide a back door for individuals suffering from gambling-related harms to use credit cards on unlicensed sites. This undermines the Gambling Commission’s own rules and unfairly benefits unlicensed operators. Even more worryingly, this blind spot provides a direct avenue for the expansion of harmful and addictive behaviour, and the accumulation of gambling debt that would not ordinarily be allowed.
With the Government’s gambling review ongoing, the emphasis should be on preventing harm, and provisions for gambling blockers would be a welcome aid in achieving this goal. Admittedly, they are not perfect; they rely on accurate merchant categorisation codes to identify gambling transactions. But this should not discount the positive part they can play. Furthermore, through greater co-operation between account providers and payment processors, a robust and data-driven system of reporting could be developed to identify unlicensed operators hiding behind incorrect merchant categorisation codes to block future transactions. With no legal requirement to provide blockers and no obligation on payment processors to diligently review the merchant categorisation codes of unlicensed operators, gambling blockers will suffer from pitfalls that could be effectively remedied through either a legislative or regulatory approach.
There are also issues this amendment does not directly deal with but deserve highlighting. Due to the entirely optional provision of blockers, there are currently no minimum standards for functionality. This is an issue when it comes to the so-called “cooling-off” or “friction” period—the time between deactivating the blocker and once again being allowed to transact for gambling purposes. As a tool that assists those suffering from gambling addiction, the ability to activate and deactivate at will renders a blocker redundant.
Of the gambling blockers currently on offer, friction periods range from instant reactivation to 48 hours. The results offered by Monzo highlight the success of stricter cooling-off periods. Its blocker, with a 48-hour cooling-off period, block around 585,000 gambling transactions per month and is active on nearly 300,000 accounts. According to its data, once it is activated, fewer than 10% of customers deactivate it. Monzo, driven by its own success, has called upon the Government to mandate that banks provide blockers and would no doubt support this amendment. However, as I have shown, it is not merely their provision that renders them successful  but their architecture. A minimum cooling-off period of 24 hours would make them far more effective tools to deal with addictions.
Finally, I will add that, in a data-driven world fuelled by digital payment systems rather than the cash we used in the past, individuals should have more autonomy over how they spend their money. Aside from their benefits in combating addiction and containing the unlicensed market, gambling blockers are an example of giving customers control over their own transactions. Actions and decisions are increasingly dictated by data that is controlled, analysed and dissected by global corporations and increasingly removed from the individual. Optional transaction blockers such as those related to gambling re-empower individuals and give them a stake in this new data-driven environment.
I thank the Government for their helpful work in encouraging the major banks to introduce gambling blockers—an endeavour that has been very successful in relation to debit cards. I know from discussions I have had with the Government that they see the benefits of blockers and continue to support a voluntary rollout. This is very encouraging and I hope that as they move forward with these efforts they will take on board some of the comments made here and find ways to promote greater data sharing between payment service providers and processors to tackle the unlicensed market. However, I remain of the opinion that for products as potentially harmful as gambling there should be not only a statutory obligation to provide opt-in blockers, as stated in this amendment, but minimum design requirements so that the positive results provided by Monzo can be emulated by other account providers.

Lord Young of Cookham: My Lords, my noble friend Lord Leigh of Hurley made a powerful case for his amendment, as did the right reverend Prelate the Bishop of St Albans for the two amendments to which he spoke.
I will speak to amendment 37C, in my name and that of the noble Lord, Lord Blunkett. It seeks to release child trust funds worth less than £5,000 held by children with learning disabilities, without the need to go through the daunting, lengthy and at times cumbersome Court of Protection process, while at the same time offering strict safeguards to prevent abuse.
Child trust funds were launched in January 2005, and 6.3 million children in the UK born between September 2002 and January 2011 were eligible to receive vouchers from the Government to invest in the scheme. Families with children who had a disability were offered additional payments to make it more attractive for them to join the scheme and to compensate them for the additional costs that they would face.
Unfortunately, no consideration was given to what would happen to any of those children if they lacked the mental capacity to manage their finances when they turned 18. I understand from Ministers at the time that this was an oversight in the original design of the savings scheme. The noble Lord, Lord Blunkett, said, on 3 December:
“I had the privilege 20 years ago of initiating the research on, and then working with the Chancellor of the Exchequer to set up,  the child trust fund. We never envisaged at that time that this situation would arise.”—[Official Report, 3/12/20; col. 827.]
When I raised this issue in your Lordships’ House on 11 February, my noble friend Lord Wolfson said:
“My Lords, the present situation is absolutely unfortunate.”—[Official Report, 11/2/21; col. 479.]
One of the problems is that this does not seem to have been anticipated by the Government who put child trust funds into existence.
I should say at this point that I am grateful to my noble friend Lord Wolfson for his sympathetic approach to this issue and for his informal advice and guidance, and to my noble friend Lord True, who has had to deal with my representations today.
In a nutshell, my amendment seeks to deal with the oversight that I have just referred to. Sixteen years later, as these funds mature, there is still no specific process to deal with the holders of child trust funds who lack mental capacity. Even in the 115 pages of the latest version of HMRC guidance notes for the child trust fund, last updated in January last year, there is no mention of learning-disabled children.
In April 2005, less than four months after the launch of the child trust fund, the Mental Capacity Act received Royal Assent and introduced the current version of the Court of Protection legislation and processes. This means that tens of thousands of children with a learning disability and a child trust fund now face the full force of a property and affairs application to the Court of Protection. For most disabled children, the child trust fund is likely to be their only financial asset and it will have a modest value. The finance industry reports that the average fund value is just over £2,000. Applying the full court process in such circumstances is unnecessarily burdensome and wholly disproportionate for families already facing many challenges to support a severely disabled child.
What do they have to go through? The current property and affairs application process means that parents will first have to familiarise themselves with the court processes and read 10 pages of guidance contained within multiple documents. They must then make an important decision about whether to apply for a full deputyship or a one-off decision from the court. In any scenario, they will need to complete a minimum of four forms—five if they wish to apply for a fee remission, a concession introduced by the Government in December, which I welcome.
That paperwork involves printing out 47 pages of information, completing 106 sections and submitting a minimum of 46 pages of hard-copy information to the court. From start to finish it will take up days of their time, rather than hours. A registered specialist such as a medical practitioner, psychologist or mental health professional must provide six pages of detailed information. Since Covid-19, some GPs are now refusing to complete the court forms, and most charge for the service, with prices ranging from £100 to £350 if an independent assessor is required.
They then have to apply to the Court of Protection. Back in September, the Court of Protection stated that applications could take up to 24 weeks for approval to be granted. Online legal discussion forums are now suggesting that the process could take eight months  or more. After getting approval, they are then beholden to the Court of Protection in respect of an annual supervision fee, possibly an annual deputy bond fee and completion of an annual report, and then, when funds run out, must apply to the court to bring the deputy appointment to an end.
It is difficult to estimate the precise number of young people impacted by this situation. Estimates range from 78,000 to 161,000 teenagers. The same applies to the junior ISA scheme that replaced the child trust fund in 2011. That could potentially increase the numbers to over 200,000 in the next 10 years.
On 1 September last year, the first children with child trust funds started to turn 18—the point at which they should all be able to access and take control of their savings. Learning-disabled teenagers who need support with finance are instead being locked out of their accounts. Parents are unable to authorise any transactions on the account after a child turns 18. If a child cannot issue instructions to a finance company, then it is not even possible to change the address on the account. Many families remain unprepared for that eventuality, and understandably most parents are very frustrated about being asked to go through a lengthy court process just to access their own children’s savings account. The numbers will only grow without a solution to this problem.
The Court of Protection is also likely to see a significant rise in the number of property and affairs applications. Even using the lower estimate of the number of disabled children impacted by the situation, the workload increase on the court could be as high as 40%, with annual applications rising from 21,000 to around 30,000. For parents with a child who has a life-limiting condition the current court process means that, tragically, it is easier and cheaper to wait until their child dies and to then access the money using the small estates process. That is the harsh reality that many parents face. It is a situation clearly not supporting the best interests of the disabled child.
Several legal firms are trying to win business off the back of this issue, promoting themselves as businesses that can help families unlock their child trust fund for a fee proportionate to their savings. This advertising is not sinister or unusual, but many families will find the court process daunting and will be tempted by these offers. Using a solicitor will exponentially increase legal costs, remove an opportunity for a refund of court fees and further diminish the benefit of the child’s savings. This is where we are heading without a solution. There has to be a change.
As I mentioned when I last raised this issue in March, in nearly all these cases the child will be eligible for disability payments from the DWP and the parent will be the appointee. As such, the parent will be handling much higher sums than those likely to be in the child trust fund without having to go through the Court of Protection process.
In March, I mentioned Hollie Squire, who requires 24-hour care. Her mother Tammie is managing the £605 a month that Holly gets from the DWP. And so I asked the question: if Tammie can be trusted with this money from the taxpayer, why can she not be trusted   with Hollie’s money from her own trust fund without complex and time-consuming court procedures? The answer given by my noble friend was this:
“I can assure Tammie and Hollie Squire that it is not a question of trust. It is, I am afraid, a question of law.”—[Official Report, 25/3/21; col. 956.]
He went on to say that the legal position is governed by the Mental Capacity Act. In a further reply on the same date, my noble friend said that amending primary legislation is not likely to be quick or easy. But at the time, neither he nor I realised that this Financial Services Bill was a potential vehicle for remedying the problem, and I am grateful to the Public Bill Office for its guidance on this.
It is frustrating that, despite the matter being raised three times in this House and many times in another place, little progress has been made. The Ministry of Justice announced in December the creation of a working group to further explore the possible solutions for families, but so far nothing positive appears to have come out of its deliberations. A number of financial institutions have made life easier for these children by devising their own processes for releasing these funds without involving the Court of Protection. However, there is some doubt about the legality of this, Ministers have refused to recommend it and it is unsatisfactory as it leads to a lottery.
That is the background to my amendment, which builds on a recommendation by the Law Commission in 1995 that there should be a small-sums exemption from the Court of Protection. The case for this amendment was made in its report:
“It was agreed by the great majority of our consultees that there was a pressing need for a simple and inexpensive scheme allowing small sums of money to be realised without the disproportionate expense and formality of a judicial process. Support came from representatives of both sides of the question; from the banking, insurance and building societies’ associations and from individuals and organisations who work with informal carers. We were told of many instances where access to a small sum of money which could be put to very good use cannot be gained without undue delay and legal costs. Some of the larger building societies already release funds to carers on a contractual basis, and they confirmed that such arrangements can work well for all concerned. We have refined our provisional proposals in the light of helpful comments on points of detail.”
The Law Commission suggested £2,000 a year for a maximum of two years. Revaluing that figure would lead to a higher sum than that in my amendment of £5,000.
I have made two changes to the Law Commission’s recommendations which should make it easier for the Government to accept them. First, it applies only to child trust funds and ISAs, on which the Minister has already said the position is “absolutely unfortunate”. Although the problem at the moment exists for child trust funds, the amendment also applies to junior ISAs. Following the reforms in 2015, CTFs can be switched into ISAs pre maturity. As my noble friend the Minister said:
“My Lords, at the moment I do not see any conceptual distinction between child trust funds and junior ISAs. What we put in place to solve this problem ought, in principle, to be applicable to junior ISAs as well.”—[Official Report, 11/2/21; col. 479.]
The Law Commission recommended a wider application, but I have narrowed it. Secondly, there is a sunset clause of two years, which gives adequate time for  parents to apply to the Court of Protection before the child is 18 and for the court to come up with a more streamlined procedure.
The amendment includes the Law Commission’s safeguards to prevent abuse. If the Government have issues with my amendment, there is time to put it right, as the Bill will have to return to another place because of amendments already carried.
So what should we do? The Government have said that the current position is “absolutely unfortunate”. Without action, it will get worse as more child trust funds mature. The Government have said that without legislation, they cannot interfere with the rules procedure of the Court of Protection, and in the eight months since “Channel 4 News” brought this problem to our attention, the Court of Protection has not responded. The working group announced by the MoJ has produced no results and the frustration and pressure for reform have understandably grown. Here we have a Bill, to reach the statute book in days, with an amendment that implements a Law Commission recommendation to deal with the problem. What are we waiting for?
I look forward to my noble friend’s reply. I do not want to press the matter to a Division, but a lot will depend on my noble friend’s response.

Lord Foster of Bath: My Lords, I refer to my interests as set out in the register. We have heard some very powerful cases for other amendments in this group, but I will confine my remarks to supporting Amendment 27. I am grateful to the right reverend Prelate for tabling it.
As the chair of Peers for Gambling Reform and a previous member of your Lordships’ Select Committee on gambling, I have spoken to dozens of people who have been affected by problem gambling. We know that there are at least a third of a million problem gamblers in the UK—probably far more. We know that, on average, very sadly, there is one gambling-related suicide every single day. We know that for every problem gambler, six other people are adversely affected by gambling-related harm, which causes huge problems for families, individuals and society, as well as huge costs to society through lost tax receipts, welfare and benefit claims and costs to the NHS and the criminal justice system. With the growth of online gambling, unless action is taken, the problems will get even worse.
I am therefore enormously supportive of the Government’s decision to conduct a review into the Gambling Act 2005, but we should never forget that, while gambling companies have no incentive to drive customers to financial ruin, they have every incentive to keep them gambling even when problems are looming. The greater the problem, the greater the profit to the gambling company.
When people with gambling problems seek to address their addiction, we should do all we can to support them. One of the most crucial tools available to them, as we heard from the right reverend Prelate, is gambling-blocking software. While self-exclusion schemes such as Gamban and GAMSTOP are effective in preventing  access to gambling sites, albeit only to those sites registered with the services, bank-based gambling blocks are a much clearer and more effective method of preventing gambling transactions and therefore better supporting those suffering from gambling-related harms and seeking to help themselves.
Recently published research from the University of Bristol entitled A Blueprint for Bank Card Gambling Blockers shows that bank-blocker mechanisms, as described in the amendment, offer great potential in helping people to control their gambling. This has been demonstrated by many customers of account providers who already provide such an option. The research from Bristol University made five recommendations: first, blocker technology should be made available digitally, by phone or in writing and, ideally, to a single point regardless of the account provider; secondly, all account providers should routinely raise awareness about blocker technology; thirdly, every blocker should be built around a time-release lock, as the right reverend Prelate suggested, of 48 hours, preventing impulse relapses from people suffering from a gambling addiction —this cool-down period would give users time to assess the implications of their request to bypass the block; fourthly, each blocker should allow limitations on cash withdrawals to prevent cash being used as a workaround for any gambling block; finally and most crucially, any form of blocking system, if it is going to be watertight, needs all account providers to be involved, not just those who choose to introduce such a system.
It was for this reason that a coalition of banks, campaigners and clinicians, led by Monzo, recently wrote to DCMS urging it to introduce a new requirement for all account providers in the UK to make sure every consumer can access a gambling block. This is the essence of Amendment 27, as outlined by the right reverend Prelate. I, too, wrote to the Secretary of State about this issue. On his behalf, John Whittingdale MP, Minister of State for Media and Data, who is now heading up the gambling review, replied just a few days ago. He correctly pointed out that NatWest Group has now joined the account providers which already have done so by introducing a 48-hour gambling block on its debit card and most Santander UK customers have been moved to Mastercard, which also has a gambling block. This is welcome news, and it means that a high percentage of customers have access to one form of gambling block or another.
However, crucially, not all customers have that option. Equally, not all schemes have the same degree of effectiveness. John Whittingdale’s response continued by saying that, “Of course further progress can be made to increase the effectiveness of gambling blocks and I hope that banks continue to strengthen these tools, as we have seen in recent months. Last week, I discussed this issue with the Economic Secretary to the Treasury, John Glen MP, and we are looking to banks to help customers manage their gambling”.
Surely the best way of achieving the desired outcome of ensuring that all account providers have strong, effective gambling blocks in place is not by encouragement but by the Government adopting the amendment or their own version of it. I hope we will get an encouraging response from the Minister. I look forward to hearing it.

Baroness Altmann: My Lords, I should like to speak first to Amendment 26, to which I have added my name, which was so excellently and comprehensively spoken to by my noble friend Lord Leigh. I support its aims and thank the Minister, my noble friend Lord True, who has spent time engaging with us on this matter. I urge the Minister to look carefully at the arguments laid before your Lordships this afternoon so well by my noble friend Lord Leigh.
There perhaps seems to be some confusion in the interpretation of “potential consumer”, because it would appear that in the FCA handbook there is a definition of that term. It gives the impression that potential consumers are covered and can complain to the Financial Ombudsman Service. However, as always, looking a little further along at the so-called small print, those potential customers must already have a relationship with the provider under complaint. In the case that was explained by my noble friend Lord Leigh, a speculative offer of a credit card does not constitute any relationship between, in this case, my noble friend and the consumer credit card company.
Nevertheless, we need to protect the consumer here, and the Financial Ombudsman Service is designed to be able to look into such matters. The aim is not to give redress to someone who did not lose out because they managed to spot the problem but to ensure that redress is available to prevent other consumers falling for the same problem and that action can be taken against a firm in anticipation of future problems that will inevitably arise—because not everybody will be able to spot the problem that my noble friend discovered in advance of any issues arising.
The idea of reporting to Action Fraud sounds, in theory, attractive. However, Action Fraud tends to be an information-gathering service; it cannot introduce any reforms. If one were to say, “I am calling you about something but have not suffered any loss”, it is unlikely, given the number of scams going on and the scale of complaints often received, that the matter would get any further, and certainly not in any timely manner. I therefore hope that my noble friend Lord True might satisfy us with some promises on looking further into this matter and taking it seriously. The Financial Ombudsman Service clearly recognises that it does not have the required powers, and there may well need to be some changes to the FCA handbook or the regulations behind it.
I was very much impressed with the arguments made on two other amendments in this group by the noble Baroness, Lady Meacher, and the right reverend Prelate the Bishop of St Albans, who clearly explained the importance of Amendment 16 on bailiffs treating customers fairly, not being quite as aggressive and having some controls, and Amendment 27 on introducing gambling blockers to help people avoid the terrible problems of losses accrued by gambling and the impact that it has on society. I hope that my noble friend Lord True will listen sympathetically on those issues. Interestingly, they revolve around trying to redress the balance between financial services providers and consumers. All too often, the provider may have more power than the ordinary consumer, who may unwittingly or sometimes innocently be caught up in problems that providers have been too heavy-handed with.
Finally, I should like to speak strongly in support of Amendment 37C, again so excellently and comprehensively explained by my noble friend Lord Young of Cookham, which addresses an issue that is the opposite way round. In this instance, providers would like to help their customers—in particular, parents of children with disabilities—to access money that otherwise would stay with that provider. The law is preventing that from happening in any timely fashion. We have an opportunity in this Bill to redress that problem, which has only just arisen and which, as my noble friend explained, was an oversight in the original legislation.
I was involved in some of the discussions on the introduction of the child trust fund, which aimed to help children have a capital sum by the time they reached age 18. All children born after 1 September 2002 received either £250 or £500 from the Government to be paid into a fund for maturity on their 18th birthday. Therefore, from September 2020, those first funds reached maturity. Many children up and down the country have been able to take that money. Unfortunately, we have a situation where, if the child is judged not to be sufficiently competent to manage their own money, their parent, who handles thousands of pounds for them in other ways, is unable to release that money.
Perhaps I may add a further example to that which was given by my noble friend Lord Young of Cookham. It is from a father called Andrew, whose son Mikey turned 18 last September and has a life-limiting condition. Andrew explains:
“We started saving money in his Child Trust Fund before we were aware that accessing it in the future would be a problem. We were encouraged and incentivised by the government to invest in a Child Trust Fund.”
The parents wanted,
“to use the money in the Child Trust Fund to purchase equipment and fund life experiences for Mikey, however, we cannot access the funds…Our time with Mikey is precious and we should not be having to spend time on this type of legal activity just to access money that ultimately belongs to Mikey.”
That sums up the problem we face.
I understand that we must be careful not to allow children with learning disabilities and disabled children to have money taken away from them under false pretences—there needs to be some protection. However, I pay tribute to my noble friend Lord Young, who has relentlessly pursued this issue time and again in your Lordships’ House through Oral and Written Questions, meetings and briefings. Perhaps my noble friend the Minister can give us some comfort that we might be able to introduce measures in the Bill such as those outlined in Amendment 37C—whether at Third Reading or in another place when the Bill goes back.
This would potentially be considered a financial application, and there are significant delays at the Court of Protection, which has understandably prioritised applications in favour of health and welfare. The problems facing the parents of these children need to be urgently addressed. Sadly, many of them have little time left with their children. This Financial Services Bill also has the support of the providers of these child trust funds. My noble friend is concerned about this issue and has generously given his time and expertise   to try to help us understand the particular problems. He has suggested that the issue revolves around a legislative roadblock. If we can free up the roadblock within the Bill, we will be doing a great service to many disabled children.

Baroness Coussins: My Lords, I support Amendment 16, in the name of my noble friend Lady Meacher and others, and I remind the House of my association with the debt advice charity the Money Advice Trust.
Anyone who has been involved with debt policy knows that the issue of bailiff regulation is a long-standing concern. Bailiffs have significant powers, including being able to enter people’s homes and take possession of their goods. Unfortunately, despite plenty of good intentions and existing voluntary national standards and codes of practice intended to govern bailiff behaviour, widespread problems remain in practice. These include bailiffs misrepresenting their powers, the failure to offer affordable repayment plans, and unfair treatment of vulnerable people or people in vulnerable circumstances. As my noble friend Lady Meacher has outlined, independent oversight would be an enormous step forward in helping people in debt to cope with, manage and overcome their predicament without unnecessary and unjustifiable additional pressures.
Noble Lords will be aware of the promising discussions currently taking place between representatives of the debt advice sector and the enforcement industry, facilitated by the Centre for Social Justice, to explore the potential for an independent oversight body. The aim of such a body—which would be funded by the bailiff industry—would be to address these problems and to raise standards. For the first time, both the bailiff industry and the debt advice sector are agreed that, for such an oversight body to be effective in raising standards, it must have statutory underpinning.
The amendment in the name of my noble friend Lady Meacher and others provides an opportunity to do just this. Of course, there are challenges to the parliamentary timetable, and relevant Bills in which to include issues such as this can be few and far between. The perverse and worst-case scenario would be to have a fully developed and agreed proposal for an independent oversight body which could not be put in place because the Government did not have the necessary powers. If the Government miss the opportunity to take action in this Bill, meaningful change is likely to be delayed much longer, with harsh consequences for people in debt.
So would it not be better for the Government to be proactive now and to accept this amendment—or, at the very least, come back with a similar version of their own at Third Reading? We cannot escape the fact that, despite the welcome support that has been put in place, debt problems will increase as a result of the pandemic. More people may face the prospect of bailiffs at their door and it is only right that the industry is properly governed and regulated, as other debt collection companies are. The Government have previously stated that they want to see practice in this sector improved and regulation strengthened. This amendment gives  them the opportunity to do so. I hope that the Minister will accept it, or commit to coming back at Third Reading with something just as good or better.

Lord Blunkett: My Lords, this group of amendments contains issues of profound importance. It is not surprising, therefore, that our progress this afternoon has somewhat slowed. I can be blissfully short, because the noble Lord, Lord Young of Cookham, spelled out in his usual eloquent and detailed fashion why Amendment 37C should be taken very seriously and that a solution must be found to the challenge that he laid out. Like the noble Baroness, Lady Altmann, I pay tribute to the noble Lord for his dedication and commitment. I have been proud to work alongside him. One of the great pleasures of this House is that it is possible to work effectively—I hope effectively—across party. The case that he made this afternoon, which he has been making for the last few months, is in my view unanswerable. The issue, therefore, is what progress can be made and what can be done.
The noble Lord, Lord Wolfson, has taken this issue seriously and to heart since he joined the House and took up his present position. Forgive me if I call the noble Lord, Lord Young, my noble friend. As he has spelled out, it is surely not beyond the wit of woman or man—working groups that do not meet or address issues aside—to be able to unlock funds that are essential, albeit small, for those for whom they were intended. My noble friend kindly indicated my history in this area. It was blighted by not having spotted that the Mental Capacity Act, which succeeded the decision to introduce child trust funds, would inadvertently lead to those funds being blocked for the most vulnerable.
I still regret very strongly that the early part of the coalition Government abolished child trust funds—driven, it has to be said, by the then Chief Secretary and not by the leading party in the coalition. But that is water under the bridge. The paradox of course is that, had the child trust funds continued and been delivered in the way originally intended—including continuous top-up funding—we would have been in a more difficult position in releasing these funds for those with learning disabilities, because the funds would have been much greater. Sometimes there are twists in life which you do not see and sometimes there are those you wish you had not.
This is a simple issue here, whether it is about Holly who was highlighted by my noble friend Lord Young, or Mikey, highlighted by the noble Baroness, Lady Altmann. I originally heard Mikey’s father outlining these issues on “Money Box”. He was also mentioned by the now leader of the Liberal Democrats in the other place. Those young people demonstrate the wider issue of access to modest but important funding that can help them at a crucial time of transition into adulthood, as was originally intended. There is also the profound issue of the growing capital asset divide in our country. With house prices accelerating as they are now, this divide will increase still further.
So I will make a very simple appeal. The noble Lord who is leading on this amendment will not press it to a vote. However, I think that the feeling of this House—both on the numerous previous occasions on which the issue has been raised and again this afternoon  by noble Lords both online and present in this Chamber —is that a solution must be found, and found quickly. My experience during eight years in the Cabinet was that there were very good civil servants who explained, quite rightly, why something could not be done. I always valued them because they prevented me putting my foot in it more often than I did. But the best civil servants were the ones who highlighted the problem and then came up with a solution.

Viscount Trenchard: My Lords, the noble Baroness, Lady Meacher, spoke powerfully in favour of her similar Amendment 136F in Committee on 3 March. The noble Baroness has now brought forward Amendment 16 with the same purpose. It is supported by the noble Lord, Lord Stevenson of Balmacara, my noble friend Lady Morgan of Cotes and my friend the right reverend Prelate the Bishop of St Albans. I support all their arguments.
There is a weight of evidence of unreasonably aggressive behaviour by enforcement agents even before the onset of the pandemic. Your Lordships should be pleased that the Ministry of Justice launched a call for evidence as part of its second review of the reforms introduced by the Taking Control of Goods (Fees) Regulations 2014. It is understandable that that review is taking longer than expected in current circumstances. My noble friend Lord True explained that resources had to be moved to bring about the passage of the Corporate Insolvency and Governance Act, which was intended to help businesses survive the lockdowns. I would be interested to hear from my noble friend the Minister whether the Act is working as the Government intended, and how many companies have successfully applied for moratoria under the Act.
As the noble Baroness explained, her amendment allows the FCA to outsource the powers it would assume under this amendment to another unspecified person or body. I think this is far from satisfactory, and that the FCA should not be burdened with responsibilities in this area. The FCA is going to be busy enough with its new regulatory responsibilities and with what will rightly be an onerous system of oversight by your Lordships’ House and another place.
The FCA is not the right regulator to become involved with issues relating to non-payment of utility bills, for example. I am surprised that the noble Baroness is apparently unwilling to accept the assurance of my noble friend that the Government’s response to the review of bailiff regulation will be issued within this year. I expect that the Government will recognise that something needs to be done to control overaggressive behaviour by bailiffs, balancing such control against the need to retain an effective enforcement process. In view of my noble friend’s assurance, I am unable to support this amendment.
However, the FCA is the right regulator to protect potential customers of regulated financial services firms as well as contracted customers. Every contracted customer is a potential customer before entering into a contract to purchase supplies from a supplier, or to purchase services from a supplier, and thereby becoming an actual customer. I therefore support Amendment 26 in the name my noble friends Lord Leigh of Hurley and Lady Altmann.
The right reverend Prelate the Bishop of St Albans has made a powerful case for his Amendment 27, requiring debit and credit card providers to offer an opt-in option for gambling blockers. Research by GambleAware published in July 2020 found that only eight financial services firms offered blockers on certain products and ranges, estimated to cover 60% of personal current accounts. The research also examined the effectiveness of blockers currently available and found that they needed to be improved. Of the eight banks that offered blockers, three banks’ blockers could be immediately turned on and off, meaning that they functioned more like a light switch than a lock. I would like to ask my noble friend the Minister whether he agrees with GambleAware’s recommendation that the FCA, in its guidance, should require banks to include gambling blockers as standard on debit and credit cards.
The FCA already recognises that all banks’ customers are capable of becoming vulnerable, but it does not recognise that those with a gambling addiction are included in the categories it already recognises, such as those who have a cognitive impairment, low resilience to financial shocks or poor numeracy skills. It is of course very difficult to define what is a gambling addiction, and it also begs the question of how far we want the state to go in protecting us from all the risks we may encounter in our lives. However, the right reverend Prelate’s amendment calls for an opt-in option and therefore has some merit. I look forward to hearing the Minister’s views.
As for Amendment 37C, in the names of my noble friend Lord Young of Cookham and the noble Lord, Lord Blunkett, I understand that the Government have announced that they will set up a working group to consider what they can do in future to make the process easier for families who need to apply to the Court of Protection to access a child trust fund or junior ISA. My noble friend Lady Altmann also claimed convincingly that something needs to be done, as did the noble Lord, Lord Blunkett.
The objective of the amendment seems sensible, and I am well aware that to go to the Court of Protection is cumbersome, time-consuming and expensive. However, I rather doubt that this Bill is the right place for this measure. I do not see that the FCA can be given any responsibility or power in this connection. I do agree that £5,000 in any year is a sensible amount, below which it should not be obligatory to apply to the court. If my noble friend the Minister considers that the Bill is not the right place for this, could he tell the House what the Government will be able to do to find a solution to this difficult problem?

Lord Sikka: My Lords, it is a great pleasure to participate in this Bill. I strongly support Amendment 27. In view of the passionate speeches by the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Foster, my contribution will be relatively short, as they have said almost everything that I wanted to say.
In this technological age, it cannot be very difficult for any provider of bank accounts, credit cards, debit cards, store cards and other electronic payment systems  to offer customers an opportunity to block payments to certain providers of services. As has already been said, the blockers actually increase consumer choice. The blockers would be of enormous help, as has been said, to those addicted to gambling or other ruinous addictions—of course, gambling is not the only one. It would certainly help their families too, because it would safeguard the family budget, which then cannot simply disappear by the swipe of a card or the click of a computer key.
I would urge that such blockers should be a necessary condition of the authorisation to trade in financial services in the UK. Other regulators, such as the Gambling Commission, should also insist that anybody who is licensed provides such facilities. The blockers obviously would not prevent people from indulging in gambling and other ruinous addictions. Nevertheless, they would really help vulnerable people in our society and I completely support this amendment.

Lord Holmes of Richmond: My Lords, it is a pleasure to take part in this group of amendments and I declare my interests as set out in the register. I will speak to a trio of amendments and I will endeavour to do it in a trice.
First, I very much support the intention behind Amendment 16. I ask my noble friend the Minister, over and above what is set out in the amendment, what reports the Government have received of bailiffs entering properties during the Covid period, both in breach of their guidance and the Covid regulations, and what action all relevant authorities will be taking in this respect.
Secondly, on Amendment 26, I very much support my noble friend Lord Leigh of Hurley, who set out the arguments perfectly and succinctly. Would my noble friend the Minister agree that there is clearly a loophole, and what will the Government do effectively to close said loophole?
Thirdly, and perhaps most importantly, I give full-throated support to Amendment 37C, so perfectly introduced by my noble friend Lord Young of Cookham. It seems one of those amendments where, for want of a small legislative change, a huge material difference could be made to so many people’s lives. It is a funds-releasing, anxiety-relieving amendment. I ask my noble friend the Minister: if not this amendment, will the Government bring forward one of their own at Third Reading? If not this Bill, what Bill?

Lord Addington: My Lords, while sitting here listening to this debate, I could not help but get the feeling that there had been a drawing of lots in the Government Whips’ Office when they were preparing to take on these amendments and the noble Lord, Lord True, lost. All of the issues here are good and real issues. If these amendments were accepted and brought forward, they would probably make our lives that little bit better.
Before I bring my full attention to the amendment brought forward by the noble Lord, Lord Young, I will say that we deserve to hear at least about a plan of action to deal with all these issues. If the Minister cannot provide that now, giving some idea of when  they will be considered is very important. They are real issues; please deal with them. That is what we are here for. The only justification for us being in this Chamber is to deal with them, so can we hear about that?
When the noble Lord, Lord Young, first raised the issue in his amendment, I said that he had put his finger on an absurdity. I have not changed my mind. I think that the noble Lord, Lord Blunkett, basically said that the cock-up school of history is alive and functioning. The rest of us who were in Parliament at the time and involved in those Bills take our share of the blame because we did not spot it either. Can we change this?
The noble Lord, Lord Young, made about half a dozen arguments in his speech for why the amendment should be accepted or acted on. The most convincing one was that, for a comparatively modest sum of, say, £3,000, you have about four or five days-worth of paperwork. That is paperwork that you might not be very good at and which you might have to repeat, over and again, to get the money out—and usually the person doing the paperwork to get the money to support the child put that money in the bank in the first place. This is beyond belief; it is Kafkaesque. Will the Minister make sure that the people who put the money in to support a child can take it out to do so? What method are the Government taking? The law does not allow it at the moment, but we change the law all the time—we are doing it now. Please can he give us a plan of action on this?
The noble Lord, Lord Young, said that he did not expect to vote on this. The ball is of course firmly in his court on this one, but, dependent on what the Minister says, I hope the noble Lord will decide whether that is the correct approach here. I know it will annoy the Whips if we have a vote on this, but if the Minister cannot give him something that is at least in some way positive, I will certainly herd my colleagues through to support it.

Baroness Finlay of Llandaff: My Lords, I will speak to Amendment 37C in this group. I declare that I chair the National Mental Capacity Forum. I hold the noble Lords, Lord Young of Cookham and Lord Blunkett, in the highest esteem, and I am most grateful to the noble Lord, Lord Young, for the time he spent talking through my reservations about this amendment as drafted.
The discussions relating to child trust funds have come about through the best of motives: trying to ensure that money can be accessed easily when a fund matures if the person for whom the fund was established lacks the mental capacity to access it and manage their money. Around 55,000 funds matured monthly since last September. To date, about 7,000 of these are held by young adults aged 18 who lack mental capacity. Some 80% of these funds are for amounts of under £2,000. The Court of Protection processes may seem daunting to many parents and so, in trying to resolve this, a process has been developed by some but not all providers.
As the noble Lord, Lord Young, said, the amendment is modelled on the 1997 Law Commission report that was behind the original Mental Incapacity Bill—a Bill  which did not proceed. That report suggested a small payment scheme, which was not progressed because there were concerns that it could be stretched more widely to cover other financial products and that it would not respect the requirement that there should be proper judicial authority to act on behalf of another person in handling their affairs if they have not been able to designate that authority themselves.
Following the important work of noble Lords on child trust funds, the Court of Protection has been looking at its rules processes and is due to meet shortly, on 20 April, to explore ways to simplify the application forms. It is important to note that the application fee has already been waived and that any form marked for urgent business goes before the urgent business judge on the same day. There is no need for a solicitor to be involved, and there have been seven applicants to date whose applications have gone through successfully without using a solicitor, so there is no need for any costs for the applicant, nor should there be delays. I hope that the noble Baroness, Lady Altmann, will assist Mikey’s parents to apply under the urgent provision, as it should be processed very rapidly as he is terminally ill.
However, there is a fundamental principle here. One person cannot access another adult’s money or possessions without their permission, or, if the person lacks capacity, can access funds only with legal authority. Although this money is called a child trust fund it is not accessible to the person until they turn 18—in other words, when they become in law an adult. That means that we are talking about somebody else accessing an adult’s money. The role of the Court of Protection is to ensure that the money accessed is limited to this fund and possibly other clearly identified funds that are the property of the 18 year-old, and to guard against misappropriation of the money.
Let us take the case of a child who has been hit by a car and sustained catastrophic head injuries. On turning 18, the trust fund money is there and there may also be a settlement for very large sums in compensation to provide for their future care. I do not see how this amendment, as drafted, would prevent larger sums than the trust fund being drawn in, and therefore how it could prevent larger sums of money being misappropriated and used by others for purposes other than the care of the person. The amendment would not restrict who can apply for this money as it does not specify that only parents or responsible carers can apply under the proposed scheme. Could cousins, siblings or others who pretend to have the person’s interests at heart access money?
Another difficulty is what happens if the person later regains some capacity. Take, for example, a person with a catastrophic head injury acquired at the age of 16 and who, with rehabilitation, may have regained enough mental capacity by the time they are 20 or 21 to be able to be involved in their own financial decisions, particularly over smaller sums of money.
Sadly, these instances that we have heard about and that have received press coverage should never have happened in the first place. In my role as chair of the National Mental Capacity Forum I have been working to raise issues around transition, highlighting the need  for planning to happen when a young person is in their mid-teens, so that when they have reached the legal age of majority at 18, everything is in place to allow future decision-making to happen, with the oversight of the Court of Protection through a court-appointed deputy.
This amendment would affect Scotland and Northern Ireland, as well as England and Wales. Therefore, I wonder what discussions have happened with the devolved Governments over this amendment. Across the UK, young people, on turning 18, rightfully have access to their trust fund, currently under judicial oversight it they lack capacity.
At first sight, this amendment might seem to solve a problem and the sentiment behind it is commendable, but I am concerned that the principle of needing legal authority to access a person’s funds—a principle that was in place before the 2005 Mental Capacity Act and has not been eroded by it—should remain intact. This amendment is not supported by the Building Societies Association, UK Finance or the bank and building society child trust fund providers, which are represented in the child trust funds working group. The fast-track urgent process is in the Court of Protection and now, with no fee attached, it would seem a much safer way to manage these funds rather than to risk misappropriation.
I hope that the exceptional process suggested by some providers will be shared with the Court of Protection, so that their revised forms will inform revision of the Court of Protection forms to make them more user-friendly. We all hope that this is resolved with alacrity. Importantly, parents providing long-term care for their child or children with severe learning difficulties and other problems of capacity need to make long-term provision through a court-appointed deputyship or, if the person at 18 has adequate capacity, through being appointed with a relevant lasting power of attorney.
I fully accept that there is more work to do to prepare parents and young people for the transition to legal adulthood at the age of 18, but this amendment does not solve this problem of a failure of planning. Therefore, regretfully, I cannot support it.

Baroness Bennett of Manor Castle: My Lords, it is a great pleasure to follow the noble Baroness, Lady Finlay of Llandaff, and her—as always—expert contribution, which has made me think again about that amendment. I put my name down for this group chiefly to speak to Amendment 27, in the name of the right reverend Prelate the Bishop of St Albans, also signed by the noble Lord, Lord Sikka, and me. The reasons for this amendment have been broadly canvassed, notably by the noble Lord, Lord Foster of Bath, well known for Peers for Gambling Reform, which I was recently pleased to join. I do not feel that I need to make this case again, but there is a useful reflection to make—drawing also on what the noble Baroness, Lady Finlay, just said, and sharing the frustration of the noble Lord, Lord Addington—about how, in this group of apparently disparate amendments, we see a real problem in the nature of our lawmaking in the difficulty of making progress. What we have here, as we had earlier with the sharia-compliant student loan,  are apparently small, easily fixed issues, on which some very expert, knowledgeable, extremely capable people have spent years working, without progress being made. This particularly applies to Amendment 16 in the name of the noble Baroness, Lady Meacher. Something clearly needs to be tackled and dealt with, and it looks simple; we need to see regulation, oversight and protection, but it is not happening.
In the interstices of what has been a rather hectic day for me, I was looking at the Law Society briefing for the National Security and Investment Bill, which is coming tomorrow. The Law Society does not have any party-political issues to raise on that, but it has looked at the Bill and has seen that we are creating huge problems. Somehow, our legislative process is not identifying issues. With commendable frankness, the noble Lord, Lord Blunkett, earlier identified his role on the issue that arises in Amendment 37C. Somehow, things are not coming together and delivering us workable laws. We need to think, as a House and as a society, about how we can end up getting more workable laws. I suggest that we need more co-operation, listening and input at the early stages, rather than a sudden decision by the Government to do something, which then results in a Bill.
We are not sure that there will be any votes on any of these amendments, but we clearly need action and I commend to your Lordships’ House the need for action on all of these, particularly Amendment 27, to protect vulnerable people.

Lord Naseby: My Lords, Amendment 37C is an issue of fundamental importance to young people who are disabled and have taken up child trust funds. The amendment before us is key. We had a thorough and competent speech from my noble friend Lord Young of Cookham, but I have just listened to another speech from the noble Baroness, Lady Finlay of Llandaff, and we have to find common ground between the two.
I declare a past interest as, when I joined the Commons in February 1974, I took an interest in the friendly society movement, which I continued until I left in 1997. I was then asked to become chairman, which I was from 1998 to 2005, of the Tunbridge Wells Equitable Friendly Society. That interest was declared at that point. In the days of the child trust fund, the Tunbridge Wells Equitable Friendly Society traded under the brand of the Children’s Mutual. It is my recollection that the Children’s Mutual was a brand leader, and we put a huge amount of effort into it. We liaised with the authorities involved at the time—not just the Government of the day but others. I am saddened and disappointed that, somehow or other, this issue got through the net. Unfortunately, the coalition Government tragically decided—George Osborne was one of the key players, of course—to wind it up. That was a great error, in my judgment.
We come to the current position, and I am pleased to hear the industry’s concerns, but I am disappointed that there has been no mention of the Association of Friendly Societies. I am sure that the majority of child trust funds were sold by the friendly societies, and I would advise those involved to make sure that the Association of Friendly Societies is involved now.  On my own initiative, I will contact the Tunbridge Wells Equitable Friendly Society to suggest that it helps and is involved.
I am not sure why we have the same problem with junior ISAs. I declare an interest here, because I contribute to the junior ISAs of my four grandchildren, who are eligible. I am disappointed, although I was not involved in the legislation on junior ISAs in depth, that the same problem appears. I do not want to add to the concerns of my noble friend on the Front Bench, but, until recently, a large number of grandparents had been buying National Savings certificates, and I wonder whether the same problem is lying there and has not been raised by anybody else.
This is a serious problem. I have faith in my noble friend on the Front Bench, and I hope that he and those involved will look at it seriously. If there is anything that I can do to help resolve this issue, I will do my best to, because it is important.

Lord Lucas: My Lords, I shall speak to Amendment 16 and I thoroughly support its intent. I have been chair of the Enforcement Law Reform Group for more years than I care to remember, and for all that time I have been aware that every side of the industry wants statutory regulation. It is not a suitable case for voluntary regulation. You need the powers that go with being set up by statute to deal with all the difficulties and conflicts that are inherent in the business of getting money out of people who do not want to give it to you.
I fully understand the Government’s caution about the drafting of the amendment, but I very much hope that everyone involved in it will hold their feet to the fire to get a suitable alternative through as soon as possible. I have one piece of advice for the Government on the amendment as drafted. It is important that whatever we create can bite on creditors. A lot of the problems in this industry have their roots in the delinquency and bad behaviour of creditors and in the disorganisation of the systems that they operate. The privilege of being able to use a bailiff should be granted only to creditors who are well set up, who have done their preparatory work, who know who is vulnerable, who have found out the right addresses, who have properly offered payment holidays or plans before involving the very expensive, onerous and sometimes distressing option of a bailiff.
When we come to have this in statute, we need some way in which a local authority, for instance, which is trying to recover debt due on council tax must demonstrate that it has done what it should in order to be allowed to use the bailiff system. There may be some other way of doing it—but not to have that connection through to creditors and think that you can regulate just by putting pressure on bailiffs would be a considerable mistake and would, in the end, result in the system not working.

Baroness Kramer: My Lords, I think my noble friend Lord Addington put his finger exactly on the problem here. These are a series of amendments, all of them good and strong, that tackle really significant issues that seem to affect a particular selection of our population who find themselves constantly recognised  but pushed into the long grass, so that we do not get regulation of the underlying problem. I hope that today we can collectively as a House ginger up the Government to say that this really must be dealt with—not just given to working groups or consulted on yet again but put on a track to get resolution quickly.
On Amendment 16 in Grand Committee we discussed bailiffs and the need to improve their behaviour and get it within the right statutory context, so I will not add more, other than to say that with Covid and the consequences for so many people who will find themselves out of work or in debt, this becomes more urgent than ever. The noble Baroness, Lady Meacher, should know that, if she finds an appropriate vehicle, we would be very willing to support on this. It must be dealt with. It would be lovely if it were in the form of a government amendment, but somebody will have to move on this very quickly or a lot of people will be paying a sad price.
On Amendment 26, in the name of the noble Lord, Lord Leigh, sometimes a personal experience leads to identifying a real problem, and he has put his finger on another problem. If I were a regulator, I must say that anyone who could get my attention and show me that we are getting abuse and misbehaviour within the financial services sector ought to be welcomed. If the definition of eligible customers makes it difficult or impossible to use as broadly as it should be, a look at that definition is urgent. If I were the ombudsman or the FCA, I would certainly want to know that someone was out there attempting to scam the public. I can assure the Government that the scammers know all the loopholes and weaknesses in the definitions, so plugging them as rapidly as possible makes obvious sense.
Amendment 27, dealing with the issue of gambling, focuses on important and powerful tools to ensure that gamblers can restrict their own imprudent or addictive behaviour. It is an important amendment. I was looking, almost by chance, at a January study in Frontiers in Psychiatry, which had done a survey that demonstrates that gamblers are at greater risk of gambling harm as a consequence of Covid and lockdown, which have exacerbated well-established risk factors for disordered gambling: social isolation, lack of social support, boredom and financial insecurity. The severity of gambling problems also has a high correlation with depression and anxiety, which are very much associated with Covid and lockdown, so we have a very unfortunate vicious circle. If this is not exactly the right amendment, I hope that the Government will act, because it seems that a lot of people are particularly at risk both now and over the months to come.
When I saw Amendment 37C, I thought it must be a government amendment that had been handed to a friendly Peer, because it seemed to tackle an issue that is absolutely pertinent. I had no idea that something like 200,000 disabled youngsters will, when they turn 18, find it difficult, if not impossible to get the benefit of a child trust fund because their carers have such hurdles to cross to access those savings. Obviously, I take seriously everything that the noble Baroness, Lady Finlay, said, but I also know the noble Lord, Lord Young, well enough to know that he would be very able to recraft the amendment to deal with the  primary issues that she mentioned. It seems to me that there are some natural safeguards because of the limits to small amounts of money, and other pertinent issues were raised to make sure that this is narrowly drafted to deal only with child trust funds, and junior ISAs could be accommodated. If he were minded to bring it back at Third Reading, if he does not get the assurances that he needs from the Government, I would be very willing to support it.
We have a long evening still ahead of us. As I said, this is a very useful group of amendments, and I hope the Government will take seriously the content of each of them and find a way to turn concern into action.

Lord Tunnicliffe: My Lords, the issues covered by this group are wide-ranging in nature but all important. Amendments 16 and 25 return to issues that we explored in Grand Committee, while the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Young of Cookham, have found interesting ways to bring important issues to our attention.
The noble Baroness, Lady Meacher, made a convincing case for the need to reform how bailiff activity is regulated. One interesting thing about the Covid-19 pandemic has been its ability to make us look at long-standing issues in a new light, and issues of personal debt are no exception to that. It is promising that both sides of the argument—bailiffs themselves and charities providing advice to those with problem debt—seem to agree on the need for change. This is not a common occurrence, and it provides an opportunity that I hope the Government will seize in the weeks and months ahead.
I know that my noble friend Lord Stevenson, working alongside the noble Baroness, Lady Meacher, has been pushing on this in the background in the hope that the Ministry of Justice can provide a more meaningful response than we had in Grand Committee. What we really need is for the department to identify an appropriate legislative vehicle for this matter. We very much hope that this will be signposted in the document promised for later this year.
Amendment 26 seeks to broaden the scope of the Financial Ombudsman Service to allow potential customers to submit complaints against financial services firms. This is a fair question to ask: clearly the noble Lord, Lord Leigh, is not satisfied with the previous answer to it. On day 1 of Report, we passed an amendment that would enable the FCA to impose on regulated financial services entities a statutory duty of care towards customers. We hope that, despite their misgivings, the Government take this forward, as we believe that new consumer-centric working practices could negate the need for a proportion of complaints to the ombudsman.
Amendment 27, tabled by the right reverend Prelate the Bishop of St Albans, is not only an impressive interpretation of scope, but raises important questions in relation to the tools available to those experiencing issues with problem gambling. Labour has previously been critical of the Government’s lack of urgency in launching reviews and introducing legislation and regulation. That process is now under way—indeed, I believe that the initial call for evidence has now closed.  It is clear to all colleagues that the current regulatory regime has serious shortcomings. Without seeking to pre-empt the outcomes of the DCMS-led review, I hope that the Minister can demonstrate that the Government will take the right reverend Prelate’s suggestions on board.
Finally, Amendment 37C raises what looks to be an important issue in relation to certain payments made from child trust funds or junior ISAs on behalf of children with learning difficulties. I do not believe that we have touched on this issue previously, so I hope that the Minister will commit to a future discussion with the noble Lord, Lord Young of Cookham, and my noble friend Lord Blunkett.

Lord True: My Lords, this has been a long and important debate, which I found to be of great interest. As many will know, I am not responsible for the grouping of amendments. That is not a matter for the Executive; it is a matter for the House. However, following on from the noble Lord, Lord Addington, I feel a little like the “MasterChef” hopeful who presents his dish to the judges and is told that there are too many things on the plate. There are different issues conjoined here: the important issue of the behaviour of bailiffs—as, being an old boy, I still call them—credit card applications, gambling protection and child trust funds in the case of incapacity. It is a diverse group of amendments, but they all relate to the protection and fair treatment of consumers and, as we have heard today, of the most vulnerable people in society. I will try to respond to each of them, but I am not certain that I will be able to satisfy every hope of everyone who has spoken. I hope, however, because I am confident from the discussions that I have had with colleagues in different departments—I come as an outsider to this—that I can assure your Lordships that my perception is that the Government are positively engaged on all these fronts and are listening, have listened and will listen.
Amendment 16, from the noble Baroness, Lady Meacher, and others, would commit the Government to making the activities of enforcement agents—also known as bailiffs—in relation to taking control of goods a regulated activity under the Financial Services and Markets Act 2000. The Government understand the importance of debts being enforced in a fair and proportionate manner. Since Committee, I have had the great advantage of speaking directly to the noble Baroness and others, including the noble Baroness, Lady Morgan, and the noble Lord, Lord Stevenson of Balmacara, along with my colleague, my noble friend Lord Wolfson from the Ministry of Justice, which is the department with responsibility for the regulation of enforcement agents. I know that my noble friend Lord Wolfson and the Minister of Justice have heard the arguments of noble Lords. I can reassure the House that the Ministry of Justice is currently reviewing the case for strengthening the regulation of the enforcement sector. As we have heard, that would be widely welcomed, as representatives from the enforcement and debt advice sectors have united to form a working group, led by the Centre for Social Justice, to consider how an independent oversight body could raise standards in the sector. The Government welcome this.
The Ministry of Justice recognises the important momentum of this development and looks forward to continuing to engage with the working group on its proposals for an enforcement conduct authority. The Ministry of Justice has also assured me that it would want to work closely with the working group to monitor the operation of the enforcement conduct authority and will review its operation within two years. At that point, it will consider whether there is a case for legislation to provide statutory underpinning to the body if necessary, as some noble Lords have argued. I stress that the Ministry of Justice will look to work with the enforcement authority as soon as it is established to assess what can be done to improve standards on the ground. It does not see the two years as a target: it would be willing to review the authority operation and consider legislation before the two years if necessary. I hope that that has reassured noble Lords that the Government take this offer from industry very seriously.
On the amendment itself, it would by default require the FCA to act as the regulator of enforcement agents unless its functions were delegated to another body within two years following the passage of this Bill. As I set out in Committee and in the valued exchanges that I have had with noble Lords involved, I think that there is now agreement—indeed, that has been expressed by the noble Baroness, Lady Meacher, and others—that the FCA would not be the right body for such a function. I must underline that the Government’s view on this will not change between now and Third Reading. We do not believe this Bill to be the right legislative vehicle for any changes to the regulation of enforcement agents. I hope that, having heard the assurances that I and my noble friend Lord Wolfson have given, noble Lords will withdraw the amendment and continue to engage with the Government as we go forward.
My noble friend Lord Trenchard asked about the use of the Corporate Insolvency and Governance Act moratorium to give UK companies a formal breathing place in which to pursue a restructuring plan in case of indebtedness. The power is working as intended. A handful of firms have already successfully applied to use the moratorium under the Act. As government support and regulatory easements come to an end, we expect the number of firms using the moratorium to increase. The new restructuring plan is also being used to good effect with Virgin Atlantic and other large firms using the new tool to recapitalise balance sheets.
Amendment 26 from my noble friend Lord Leigh of Hurley seeks to expand the jurisdiction of the Financial Ombudsman Service to include potential customers. I am grateful to my noble friend for his characteristic persistence on this important issue and I know that he is keen to make sure that the regulatory system ensures that others are not faced with the same potential risk of fraud that he experienced. As I sought to reassure noble Lords in Committee, it is already the case that both customers and potential customers of a firm can seek redress through the FOS scheme under the FCA’s existing rules, notably rules in the FCA dispute resolution handbook.
If we have understood the specific case correctly, my noble friend was the unfortunate victim of attempted fraud and did not intend to be a customer of the firm.  He was therefore not a potential customer as defined by the relevant rules that cover people seeking to be a customer. As I said in Committee, I assure the House that had this incident led to financial loss or to my noble friend being pursued for a debt that was not his, he would have had recourse to the FOS and been supported by the current regulatory framework.
However, my noble friend was lucky to have intercepted the attempted fraud. In order to prevent harm to others, he has raised a valuable suggestion regarding ways in which financial services firms could protect customers against attempted fraud, namely that credit card companies should be obliged to verify potential customers and seek confirmation of their application before issuing their new card.
The FCA is responsible for setting rules on how firms should act when dealing with an application for a financial services product, and the FCA requires all authorised firms to have systems and controls in place to mitigate the risk of their being exploited to commit financial crime, as the noble Baroness, Lady Kramer, suggested. Any changes to these rules are the responsibility of the FCA, which also has a statutory duty to carry out a cost-benefit analysis and to consult ahead of making changes to its rules.
I am pleased to inform the House that since we last discussed the matter, senior Treasury officials have raised my noble friend’s case with Nikhil Rathi, the chief executive of the FCA. I can therefore assure him that the matter is in the knowledge of the FCA at the very highest level. I am grateful to my noble friend for raising this important issue and hope I have reassured him that his concerns have been brought to the attention of the FCA at that highest level, and therefore that he feels able to withdraw his amendment.
So many noble Lords spoke so eloquently and with such feeling on the next group of amendments, another important group, initiated by the right reverend Prelate the Bishop of St Albans. The Government recognise the value in voluntary gambling blocks to allow gamblers to self-exclude from making payments to gambling operators. This would add friction to the system to help gamblers manage their spending.
The UK banking sector has already made considerable progress in this area. Since an industry round table in February 2019, when the then DCMS Secretary of State set out the merits of these features, almost all the largest UK banks, as well as some of the digital challenger banks, have introduced voluntary gambling blocks for their debit cards. This represents a significant expansion of coverage, and access to gambling blocks is approaching approximately 90% of the current account market.
The Government also recognise the importance of cool-off periods to prevent these features being switched off immediately. Your Lordships’ Select Committee on the Social and Economic Impact of the Gambling Industry made a recommendation last year that cool-off periods on gambling blocks should be at least 48 hours. I am pleased to say that almost all the banks that provide gambling blocks now have this provision.
Regarding credit cards, licensed gambling operators in the UK are already prohibited from accepting credit card payments. On top of this, most of the major high-street banks already block credit card payments to gambling operators where they have the correct merchant categorisation code.
The right reverend Prelate quite reasonably asked about unlicensed operators. Unlicensed gambling operators are illegal, so they sometimes get around gambling blocks by pretending to be other types of merchant. Requiring a universal gambling block would not solve this problem. By the time a bank has realised it is making payments to an illegitimate operator, it is likely the Gambling Commission has already been made aware of the illegal operator and taken action to ensure it ceases operations. It is an issue on which we continue to reflect.
There is clearly already comprehensive market coverage of gambling blocks—already 90%, as I said—which means that customers who wish to use these features can either speak to their bank about how to access them or switch to an account that better suits their needs, so we do not see a case for this amendment.
However, I can say to the right reverend Prelate and other concerned noble Lords that the Government recognise that, despite the enormous amount achieved by the industry on a voluntary basis, it can go even further. That is why the Government will shortly write to UK Finance to organise a further ministerial round table with the sector in which we will talk about the action it has taken on gambling blocks and the concrete steps that can now be taken to go even further. This will include looking at the cooling-off periods that apply to blockers—that is, the ease and speed of turning them on and off. I hope that with that assurance, the right reverend Prelate will be able to withdraw his amendment.
I turn lastly to Amendment 37C, which brings novel material into the Bill at what is, frankly, quite a late stage. I recognise that it carries forward a campaign on which my noble friend Lord Young of Cookham and others spoke eloquently. The amendment seeks to give parents and others access to matured child trust funds and junior ISAs where an individual lacks mental capacity, without the form of legal authority required under the Mental Capacity Act 2005. The noble Lord, Lord Blunkett, also spoke eloquently on this point.
I begin by thanking my noble friend Lord Young for his focus on this topic. The Government are committed to supporting parents and carers in the most balanced and sensitive way. While I understand the intentions behind this amendment, we have real misgivings about this proposal, which is not compatible with the Mental Capacity Act. The Act upholds a long-established principle that legal authority is required to deal with the property of an adult who lacks mental capacity, through a lasting power of attorney or an order of the Court of Protection. This is a vital safeguard for the protection of vulnerable people and their assets; the noble Baroness, Lady Finlay, reminded us of that. We should not seek to bypass that Act in this Bill.
However, I assure noble Lords that the Government are working with financial institutions to ensure that parents and guardians are made aware in good time of  the Mental Capacity Act and the possible need to make an early application to the Court of Protection. My noble friend made a strong argument about the appropriate balance between complexity and clarity. Having myself wrestled with the issue of long-term responsibility for a disabled person—sadly, lately deceased —I understand the motivation behind his remarks.
The Ministry of Justice is seeking to make the process of gaining legal authority as straightforward as possible. My noble friend Lord Wolfson, who is personally engaged with this matter, as my noble friend Lord Young knows, and whose commitment has been recognised by many in this House, has met the president of the Court of Protection to discuss it. While court forms are a matter for the judiciary, this item will, as the noble Baroness, Lady Finlay, said, be on the agenda at the next Court of Protection Rule Committee on 20 April. That committee oversees court forms and processes for applications to grant legal authority where individuals lack capacity, and it will consider whether the forms can be simplified in some ways, as my noble friend asked.
In December, moreover, the Government issued clarification of the guidance on court fees and child trust funds regarding the need to make an early application to the court and the availability of a fee remission. That means the vast majority of those applying to the Court of Protection will not have to pay a fee.
However, we do not think it possible to give this due consideration as an amendment to the Bill at this late stage. If the Government were to legislate on such an issue, it would be important to consult beforehand with the financial sector and others, including disability rights groups, and to consider the UK’s international legal obligations. Therefore, it is not possible for the Government to accept this amendment.
The amendment itself raises many concerns, as it extends far beyond giving parents and guardians access to matured child trust funds and junior ISAs and could enable third-party access to any bank or building society account. In addition, withdrawal amounts are high and the amendment does not address the circumstances, as the noble Baroness, Lady Finlay, pointed out, of an adult regaining capacity. I do not for a moment imagine that this is what my noble friend Lord Young of Cookham intended, but it demonstrates the need to consider this area carefully and in detail.
I repeat and give the assurance that this is a priority for the Government. At the Ministry of Justice, my noble friend Lord Wolfson—I have been present in meetings where he has engaged on these matters—continues to look at this and will carefully consider whether there is a need to legislate once all relevant issues have been fully considered. We have engaged further with the relevant stakeholders and my noble friend Lord Young of Cookham and others who are interested. We are not ruling anything out at this stage.
I hope that I have given my noble friend confidence that the Government do take this issue seriously but that this Financial Services Bill is not the right place to address it. Therefore, I hope that he will feel able to withdraw his amendment, and I also hope that I have managed to assure all those who spoke so eloquently  to this important, persuasive and vital group of amendments that the Government do and will consider all these issues seriously, now and in the future.

Baroness McIntosh of Hudnall: My Lords, I have received one request to speak after the Minister from the noble Lord, Lord Young of Cookham.

Lord Young of Cookham: My Lords, I thank my noble friend for stretching the constraints that we understand are forced on him as far as we could reasonably expect. I ask him, without trampling on the independence of the judiciary, to convey to the Court of Protection before the next meeting the strength of feeling on all sides of the House about the need to streamline, accelerate and simplify the process.
In not ruling out legislation, does he understand that, in the next Session, if I, and others who have been good enough to speak, believe that progress has not been sufficiently speedy, we will be back with the first possible legislative vehicle to press the issue again, having taken on board some of the reservations expressed during the course of this debate?

Lord True: My Lords, I am confident that your Lordships’ Official Report is breakfast-time reading for every member of the Court of Protection, as indeed for every other citizen in this kingdom. I assure my noble friend that we will make sure that all those interested are made aware of the arguments that he and others have put before the upcoming meetings that have been referred to.
On going forward, I assure my noble friend that the Government will be happy to provide updates on progress on this matter to Parliament. We are very happy to continue the conversation with him, particularly on the issues that he has just raised.

Baroness Meacher: My Lords, I thank the many noble Lords who spoke so powerfully in support of Amendment 16. I also note the powerful speeches in support of the other significant amendments in this group, as has been pointed out. I reassure the noble Viscount, Lord Trenchard, that, in fact, we are very clear that the Financial Services Authority is not the right vehicle to become the regulator for the enforcement industry—we made that very clear to Ministers in our meeting, as the Minister knows, and I tried to make that clear in my speech. I am also very grateful for his response to Amendment 16 and the other amendments in the group.
Of course, the Minister will not be surprised that the many people involved in Amendment 16 will continue to work with the noble Lord, Lord Wolfson, and others to try to achieve statutory underpinning for the enforcement regulator from the start because the industry regards this as absolutely essential. We will look to the PCSC Bill as a possible vehicle for that. On that basis, I beg leave to withdraw my amendment.
Amendment 16 withdrawn.

Baroness McIntosh of Hudnall: We come now to the group consisting of Amendment 17. Anyone wishing to press this amendment to a Division should make that clear in the debate.

Amendment 17

Lord Stevenson of Balmacara: Moved by Lord Stevenson of Balmacara
17: After Clause 40, insert the following new Clause—“Bills of Sale Act 1878 and Bills of Sale Act (1878) Amendment Act 1882(1) The Bills of Sale Act 1878 and the Bills of Sale Act (1878) Amendment Act 1882 are repealed.(2) In consequence of the repeals made by subsection (1), the following are also repealed—(a) the Bills of Sale Act 1890;(b) the Bills of Sale Act 1891;(c) section 23 of the Administration of Justice Act 1925;(d) in Schedule 11 to the Constitutional Reform Act 2005, in paragraph 4(3), the entry relating to the Bills of Sale Act 1878;(e) in Schedule 13 to the Tribunals, Courts and Enforcement Act 2007, paragraphs 17 to 19;(f) in Schedule 9 to the Crime and Courts Act 2013, paragraph 15.”Member’s explanatory statementBills of Sale are mainly used for “log book loans”, one of the last sources of high cost credit. They are governed by two Victorian statutes which the Law Commission recommended in 2017 should be repealed. This amendment is to further probe the Government's plans to review that recommendation.

Lord Stevenson of Balmacara: My Lords, I am speaking to Amendment 17, which has been retabled in the same form in which it appeared in Committee. I am grateful to the noble Baroness, Lady McIntosh of Pickering, for her support, and I look forward to her contribution and that of the noble Lord, Lord Holmes, in due course. I also thank other noble Lords who have spoken on various amendments we have considered over the passage of this Bill that all relate to the devastating impact that high-cost credit can have on those who borrow from such providers. We are gradually reducing the number of these providers, which is a good thing, but we still need initiatives for the growth of low-cost credit sources, which are urgently needed to replace them.
I am grateful to the Minister for facilitating several meetings on this issue. The noble Lord, Lord True, and his officials have shown a genuine willingness to engage, and we have initiated this debate to allow further assurances to be placed on the record. When the Minister responded to the debate in Committee, he reminded us that the Government had previously set out their intention to repeal the Bills of Sales Acts, which is the focus of Amendment 17, and replace them with a new goods mortgages Act. He also mentioned that, while the consultation carried out in September 2017 showed broad support for this, some stakeholders raised significant concerns about the degree of consumer protection to be afforded by the proposed new regime. We accept that the concerns raised by stakeholders need to be addressed. We also concede that, egregious, archaic and unsatisfactory as it is—I am using the words from the Law Commission—simply repealing the Victorian bills of sale legislation will not, in itself, sort out the problems arising from logbook loans.
When he comes to respond, I hope that the Minister will be clear that the Government will continue to reflect on this issue as part of an upcoming workstream, which I believe will begin with the review of the broader consumer credit regulatory framework and then consider a range of possible reforms. While we would not wish this issue to be rushed, we need to be assured that the issues around high-cost credit will not simply be filed as “too difficult.” If the Minister is able to address our concerns and speak to this last point on timescale, we would see no need to test the opinion of the House on this occasion. I beg to move.

Baroness McIntosh of Pickering: It gives me great pleasure to follow the noble Lord, Lord Stevenson of Balmacara, and lend my support, with my co-signing, to an important follow-through from the Law Commission’s conclusions and recommendations. I echo the remarks I made in my support in Committee, and I believe the contribution from the noble Lord, Lord Stevenson, has been modest today. We are seeking reassurances, and I echo his concern about a definitive timescale.
It is interesting to note, as a non-practising Scottish advocate, that bills of sale do not apply in Scotland, so the Act does not extend to Scotland, and the provisions only really apply to England and Wales in this regard. Bills of sale, being mainly used for logbook loans, relate mostly to vehicles. But this is an opportunity, in supporting the amendment before us this afternoon, to probe my noble friend and the Government a bit further about what their plans are to review the recommendation.
Law Commission reports do not come along that often, and they come along often at the invitation of the Government. I would like to ask my noble friend about his intentions to give effect to the recommendations of the Law Commission report of 2017. In the consultation paper, it was proposed that the Bills of Sale Acts should be repealed in their entirety and replaced with new legislation to regulate how individuals may use their existing goods as security while retaining possession of them. Out of the 32 consultees who expressed their views, 24—75%—agreed to that.
I entirely endorse the Law Commission’s opinion that:
“The Bills of Sale Acts are written in obscure, archaic language, using words such as ‘witnesseth’ and ‘doth’.”
That sounds a bit like “the Leith police dismisseth us”. In the interests of modernising the legislation and making it more transparent, the purpose of Amendment 17 is entirely clear, and I take this opportunity simply to nudge and press my noble friend on what the Government’s intentions are now, four years on from the Law Commission’s recommendations.

Lord Holmes of Richmond: My Lords, it is a pleasure to follow my noble friend Lady McIntosh, and to congratulate the noble Lord, Lord Stevenson of Balmacara, on all his efforts in this respect. The Law Commission’s recommendations seemed pertinent and on point in 2017; four years on, they seem similarly pertinent and on point. Will my noble friend the Minister set out the pathway and the timetable for consideration of those arcane statutes, and tell us what issues and other legislation, which he alluded to, may also be under consideration along that pathway?

Baroness Kramer: My Lords, I shall be extremely brief. It is absolutely clear that bills of sale legislation is fraught with problems both legally and practically, including allowing goods to be repossessed on a single default, and giving no protection to purchasers who unwittingly buy goods subject to bills of default. The Government promised us reform, and they had a draft Bill from the Law Commission in 2017, but then they changed their mind and decided not to legislate. If they can change their mind once they can change it twice, so I hope they will now change their mind again, and take action.

Lord Tunnicliffe: My Lords, I shall be brief in responding to the amendment, which was ably introduced by my noble friend Lord Stevenson of Balmacara. We are grateful to the Minister and officials for their time discussing this and other consumer issues during the passage of the Bill. Those meetings have been useful, particularly for better understanding the numbers of people affected by financial agreements enabled by the antiquated bills of sale Acts referenced in the amendment. We understand that the Government cannot simply accept the amendment, because of the complexity of the issue and the scope for unintended consequences. Normally we would roll our eyes on hearing that phrase, but, as my noble friend noted, this amendment was tabled as a means of starting a conversation. We hope the Minister can give a strong commitment from the Dispatch Box that the Treasury will undertake a proper review of this part of the credit market, and will have regard to the earlier Law Commission recommendations when deciding on a policy response.

Lord True: My Lords, again I thank all those who have spoken in this slightly shorter debate. I thank the noble Lord, Lord Stevenson of Balmacara, very much for his continued engagement with all aspects of the Bill and with the underlying issues of credit—on which he has long been such a distinguished advocate—and for his interest in this issue. I hope I will be able to give him an assurance that he will find satisfactory.
First, however, I must respond to my noble friends Lady McIntosh of Pickering and Lord Holmes, who asked about the Law Commission report. The noble Baroness, Lady Kramer, also alluded to it. I set out in Committee the reasoning behind the Government’s decision not to take forward their proposed goods mortgages Bill, which had followed from the Law Commission report, in 2018. That Bill would have repealed the bills of sale Acts and replaced them with a new goods mortgages Act, and it was the result of the Law Commission’s report on bills of sale, to which my noble friends referred.
However, when the Government consulted on the proposed goods mortgages Bill, the consultation responses—not all of them, I confess, but the serious responses—showed that while there was broad support for the proposed approach set out in the Bill, some stakeholders raised significant concerns about the degree of consumer protection afforded by the proposed regime. Furthermore, there was a risk that a more modernised, streamlined regime for consumers could lead to more consumers using goods that they already  owned as security for a loan, which is inherently a higher-risk form of borrowing. Given the concerns raised in the consultation and the shrinking size of the market, the Government decided not to take forward the goods mortgages Bill. Still, I highlight again that the use of logbook loans has fallen substantially and continues to decline: the number of bills of sale registered at the High Court has fallen from 52,000 in 2014 to just 3,758 in 2020—and a little higher the previous year. Obviously, we will watch this figure.
A number of other points were also raised in Committee. The noble Lord, Lord Stevenson, raised the cost of logbook loans. It has been suggested that some of these loans have very high interest rates. There is already a power for the FCA to cap the cost of all forms of credit, including logbook loans. It will use that power where it thinks it is necessary to protect consumers. Most recently, it capped the cost of rent-to-own products in March 2019.
My noble friend Lady McIntosh questioned in Committee why a model that used hire purchase could not be used for logbook loans. Hire purchase is a financing option that allows borrowers to hire a car and then gives them the option to buy it by the end of the contract. This model would be inappropriate for borrowers who already own their vehicle, as ownership of a vehicle should automatically revert to the borrower when they have repaid their loan.
I turn to the amendment itself. As I explained in Committee, it is likely to have unintended consequences that could lead to a greater risk of detriment, particularly to borrowers. The repeal of the bills of sale Acts would not necessarily prevent this type of credit being offered. Rather, it would remove the statutory framework that governs this type of credit, which could inadvertently lead to a greater use of such lending through the removal of some of the frictions to which some who have spoken have alluded—“frictions” is a polite Treasury word—that the bills of sale Acts impose. Given that, the Government do not believe that repealing the bills of sale Acts would be an effective way of increasing protection for borrowers. Furthermore, the Government do not believe that it would be proportionate to introduce new legislation to specifically implement a replacement for the bills of sale Acts, given the continued decline in their use.
However, I recognise the strength of the feelings of the noble Lord, Lord Stevenson, on the subject of logbook loans, and I have heard the echoes that his resounding voice has provoked. I understand that he wants to know what plans the Government have to review the regulatory treatment of logbook loans. I have had the opportunity to discuss this issue with the noble Lord. As we look beyond the Covid-19 crisis, the Government are keen that work should progress to consider reform of the broader consumer credit regulatory framework to ensure that it remains fit for purpose. That is a substantial piece of work. As part of it, I can give the noble Lord the specific assurance that he asked for: the Government will consider the extent to which that regulatory framework can provide robust protections for logbook-loan borrowers and third parties who may unknowingly buy a car subject to a logbook loan. On that basis, I hope the noble Lord will feel able  to withdraw his amendment. I have every confidence that, even if he does, he will continue to knock at the Government’s door.

Lord Stevenson of Balmacara: My Lords, I thank all those who have spoken on this amendment and those who spoke in Committee on this issue. It must be obvious that I think the case for reform here is unanswerable and that we need to move forward as soon as we can. The Minister made a kind reference to my assiduous pursuance of this over the last four years; I can assure him I have only just warmed up. I have plenty more capacity now that I have stepped back from the Front Bench and this remains one of my main targets—so I will be calling again in the near future.
I was slightly struck by the rather defensive notes in the early part of his speech, because I do not honestly think there is much you can say about bills of sale other than that, ironically, when they were first introduced—although not in Scotland—they were in essence an early form of consumer protection. What has gone wrong, of course, as he mentioned, is that the considerable collateral damage to subsequent purchasers of goods subject to bills of sale has been devastating for many people. Yes, it is true that the numbers are down, but I do not buy the argument that it is okay to let this egregious behaviour carry on simply because there are not very many. Every single person affected by this is affected in a most extraordinary way, and it should not happen.
The noble Baroness, Lady McIntosh, was right; we should look at the wording of the original bills and see what the Law Commission said about it. Even if it were a question of rewriting them in modern language and trying to fit them better into the existing consumer protection framework, that would be a job worth doing—but actually there is a greater harm behind that. However, I am not going to engage with that at this stage; there will be other opportunities to talk to the noble Lord and indeed to the Economic Secretary to the Treasury, who I know has an interest in this.
The Minister has confirmed that the Government will continue to reflect on this issue as part of the upcoming review and build on their earlier decision, which was publicly announced, to repeal the egregious and archaic bills of sale. We can hope that that will happen quickly, but we understand it will take time. I will certainly be pursuing it by whatever means I can. Indeed, I am sure there will be other legislative opportunities, as well as questions the Minister will have to prepare for. In the meantime, I accept what is on offer. I think it is made in good faith and I will make sure we stick to that. I beg leave to withdraw the amendment.
Amendment 17 withdrawn.

Baroness McIntosh of Hudnall: We come now to the group beginning with Amendment 18. Anyone wishing to press this or anything else in the group to a Division must make that clear in debate.

Amendment 18

Baroness Bowles of Berkhamsted: Moved by Baroness Bowles of Berkhamsted
18: After Clause 40, insert the following new Clause—“Undertakings from regulatorsThe FCA and the PRA must each give and publish the modes and timing of the provision of information and responses to Parliament concerning their activities and rule-making.”Member’s explanatory statementThis amendment would require the FCA and PRA to give undertakings about liaising with Parliament.

Baroness Bowles of Berkhamsted: My Lords, I have tabled three similar amendments in this group, with increasing levels of requirements. Although they were drafted before we had the letters from the regulators, the correspondence from the Minister and today’s letter from the Economic Secretary, the amendments still have currency. Along with other amendments in this group, they allow us to explore current provisions and the adequacy of assurances regarding Parliament’s rights. I remain concerned that there is not even the slightest recognition on the face of the Bill that increased scrutiny must come with wider powers for the regulators. It requires very substantial on the record commitments to make up, even temporarily, for that absence.
In Grand Committee we debated amendments that covered wider aspects of Parliamentary scrutiny than just rule making, as we did on day one of Report, but the heavy focus on rule-making powers is because they are changing right now. EU democratic scrutiny is gone, and the middle statutory instrument layer and formal parliamentary scrutiny are being diminished or removed. Therefore, Parliament’s role needs shoring up. The Minister can be in no doubt about the consensus on that matter, not just in this House but in industry, from replies to the consultation. However, he and the Economic Secretary seem to be maintaining the fiction that, despite the front running in this Bill, change is not actually happening until the end of the consultation.
In the recent reply to the noble Lord, Lord Tunnicliffe, which Labour colleagues have shared with us, the Minister states the caveat that the primary purpose of consultations is to consult industry, practitioners and consumers. That caveat further demonstrates why it is very necessary to have Parliament’s role explicitly reserved.
My family of Amendments 18, 19 and 20 is aimed at finding whether there is something that the Government can accept or modify. Failing that, it is a progressive list around which I ask the Minister to specify whether Parliament, including relevant committees of this House, has these rights already, and whether the regulators must co-operate even if it takes more time, effort, appearances and resource than they are used to at present. That is needed because of the significant change that is already happening—and now, not at a future date.
It did occur to me that perhaps it was necessary for there to be at least a line in legislation giving authorisation for regulators to use more resources, or to remove excuses based on resources, and that the Minister might perhaps be tempted by what is the baby of my amendments, or something similar, which requires  merely an undertaking from regulators about timing, provision of information and responses to Parliament concerning their activities and rule making. The resources point is not just my concern. A former regulator, albeit not of financial services, has also wondered, in conversation with me, whether there is authorisation to expend additional resource. That concern is further heightened by the Minister’s caveat on the primary purpose of consultation.
So my question to the Minister is: will he categorically say that there is no reason, including that of resources, for the regulators to ration their appearances before committees and other engagements with Parliament? Can he assure us that, even if there is a lot going on, busyness is not an excuse for regulators to delay appearances before committees or to delay provision of information? Indeed, does he agree that it may well be the opposite, and a lot going on can be a reason for additional engagement?
If we look at what is already being front-run, in terms of Basel and investment firms and then, starting in a week or so, an abbreviated consultation on matters relating to the Hill review, with plenty more to follow, it looks as if many, even most, important changes are going to happen well before we get to the end of the review on the future regulatory framework and that moment when it is suggested that legislation concerning Parliament may be appropriate to fit the anointed changes.
If I were a cynic, I would say the Government have conveniently timed all the front running so that the big work is all done before Parliament’s role has been modified to fit—and that is an insult to parliamentary democracy. Therefore, will the Minister confirm that the regulators must provide high-level witnesses and evidence when requested, and not just to committees but also to APPGs and other parliamentary activity that is all part of wider scrutiny? Speakers are provided to industry conferences: why not to parliamentary ones? Is not engagement with Parliament an important part of communication with the public, including in the context of consultations that the Minister has said are aimed primarily at the public, as well as industry?
The second of the amendments adds a list of documents that must be provided to Parliament no later than they are provided to the public. It might seem trivial, but this is saying that Parliament is not just another consultee. The Minister’s caveat says Parliament is not the primary purpose of the consultation: in that case, there is all the more reason why separate engagement must be assured. I am very disappointed that the Economic Secretary has taken a different view by saying that the response could just be in the general consultation response.
My second amendment would also add in that there must be
“due regard to recommendations made by … Parliament.”
This “due regard” is important. It is explicitly said in the letter from the PRA, but it is not explicit in the FCA letter and it is a key commitment sought in the cross-party Amendments 45 and 48. In this matter we all await confirmation from the Minister that the regulators must—I say “must” rather than a conditional  “should”—have regard to Parliament’s views. The Economic Secretary seems to agree with this, even if not specifying a dedicated response.
I turn now to my third amendment. This is definitely daddy bear porridge and no doubt too hot for the Government, but it is based on real life and is just a small part of what is in the interinstitutional agreement that I negotiated between the European Parliament and the European Central Bank concerning eurozone bank supervision. Maybe the Minister can confirm whether most of what I suggest does or can already happen, but I want to run through the thinking and culture behind the additional elements.
First, there is
“a principle of openness and sincere co-operation.”
By that I mean not being defensive and saying the minimum that can be said. We all know that there is a great deal of coaching of officials, whether from departments or regulators, before appearing at committees about how to deal with awkward questions and not to say too much. We have all suffered the “talk long, say little and use up all the available time” strategy. That is not openness and sincere co-operation, and there is a culture issue here that needs to change. I am not so naive as to think that it can be changed by a legislative amendment, but I want to make the point for the record that it is an issue.
My third amendment would also add in “regular updates” on principles and the kinds of information and indicators used in developing rules and policies. This would, of course, include policy on supervision and enforcement, as well as rule-making. Here, I want to pick up on another point that the Minister put in his reply to the noble Lord, Lord Tunnicliffe. I will read it because not everyone has seen it. The Minister says:
“And we would be comfortable about agreeing that Parliament has the principal role in terms of the broader matter of scrutiny and oversight of the regulators’ activities”.
The Economic Secretary also states a unique and special role, but we can scrutinise only what we are allowed to access. It is necessary to see the ingredients, not just the baked cake.
During the years that I was immersed in EU legislation, one of the refrains that I constantly heard from HMT and regulators was how the EU Commission and the ESAs were so reliant on information from the UK in order to calibrate rules, and that was why the UK regulators could do a better job on their own for the UK. This information, so it was claimed, was fundamental to rules and therefore it should be sufficiently available to show how the case is made, and confidentially when appropriate. So, do we, Parliament and Parliament’s committees, have access to it?
Confidentiality of data is sometimes used by regulators as a reason to be very approximate in public answers in committee. It has been my experience that, once that excuse is removed because a private briefing can be requested, it tends to be used less as an excuse during the public stage. Will the Minister therefore confirm whether all this kind of information is within the rights of Select Committees in this House, as well as the Treasury Select Committee, to require, and if not, why not?
Finally, although it is not in the amendment, can the Minister confirm that Ministers must attend committees when requested? Much is made in the future regulatory framework consultation about regular accountability of Ministers; it is at the top of page 27, for example. My recent experience on the Economic Affairs Committee has been of difficulty in getting timely—sometimes any—attendance from Ministers.
Everyone is trying to do a good job; that is what these and other amendments in this group are trying to ensure. But if Parliament is restricted from doing a proper job on all the front-run legislation, responsibility for that from this Bill forward lies clearly at the feet of the Minister and the Government. I beg to move.

Lord Blackwell: My Lords, I should like to speak to Amendment 37A in my name and remind the House of my former interest as chairman of a regulated bank until the beginning of the year.
As the noble Baroness, Lady Bowles, set out, within the group there is a range of amendments that seek to serve the same purpose and there is a lot of common ground, as indeed there is in the letter of the Economic Secretary that was circulated today. All the amendments reflect a broad consensus, as expressed in previous stages of the Bill, that with the new rule-making powers post Brexit, there is a need to establish more formal parliamentary scrutiny. There has been consensus in the debate that scrutiny requires a committee charged with that role and appropriate technical support. I and others have made the case that that should involve a joint committee of both Houses, although that is not for this legislative stage.
There is also agreement in all these amendments that where regulators precede their regulation with a public consultation, the information should be provided to Parliament at the same time to allow time for it to comment and its views to be taken into account before the rules are finalised. There is also common ground that regulators should take note of Parliament’s views and respond in some form.
I therefore have some sympathy with the amendment, and Amendments 19 and 20, moved and spoken to by the noble Baroness, Lady Bowles, but I prefer mine because those amendments, particularly Amendment 20, are overly prescriptive on the nature of the information and the interaction between the regulator and a parliamentary committee. It should be up to the committee charged with this responsibility to set out exactly the information it wants and how it should interact, as a parliamentary, rather than legislative, matter.
My amendment also adds the requirement for Her Majesty’s Treasury to set the regulations through secondary legislation, to take note of the parliamentary scrutiny and to bring forward statutory instruments to change the secondary legislation that provides the legal framework for rule-making, which may be a necessary response to the comments made. That is also fully consistent with the Economic Secretary’s letter.
The big divide is between my amendment and Amendments 45 and 48, which introduce a requirement for parliamentary approval of rules before their introduction, other than in exceptional circumstances.  Such a requirement would fundamentally change the relationship and role of regulators, originally established as independent, apolitical experts acting under parliamentary laws. Of course, regulators should be subject to scrutiny in their role but for Parliament to approve rules before they are enacted removes the independence of the regulators, effectively thereby making Parliament the operational rule-maker and those rules more subject to political views and intervention. We do not impose that ex-ante approval of rules on any other regulator in any other sector, so far as I know. I cannot imagine that our expert regulators in the financial services sector would be comfortable operating under those straits, whereby anything they did had to be pre-approved by Parliament.
The case for parliamentary oversight is unanswerable, but the proper regime is for Parliament to charge the regulators with independently operating the legal framework that it sets up, and then for Parliament to scrutinise how they operate those responsibilities and to change the legal framework if it wants to change the outcome, rather than Parliament seeking to supervise and approve the detailed rule-making on a day-to-day basis. Rather than wait for future legislation, I hope my noble friend the Minister will find it possible to support my amendment. Failing that, I hope the House will clearly reject Amendments 45 and 48 and the huge —and, in my view, undesirable—shift in the relationship between regulators and Parliament that they would represent. I look forward to my noble friend’s response.

Baroness Noakes: My Lords, I have added my name to Amendments 45 and 48 in the name of the noble Lord, Lord Eatwell. I also support the intent behind the amendments in the name of the noble Baroness, Lady Bowles of Berkhamsted, and I know that she too supports his amendments. As has been said, these amendments concern one of the key issues that emerged during scrutiny of the Bill: the parliamentary accountability of regulators and the scrutiny of their actions. As already noted, there was widespread agreement around the House at Second Reading and in Committee that Parliament should have a role in scrutinising the rules that the FCA and PRA may make under the new rule-making powers created by the Bill.
Of much greater importance will be what happens when the Government expand the rule-making powers of the FCA and the PRA, as they have outlined in their consultation document on the review of the financial regulation framework. What we do in the context of the Bill is clearly important in signalling what we expect in the context of a larger shift in rule-making powers, if that is what the Government decide to do following consultation. This is particularly important because the Government’s analysis of parliamentary scrutiny in their consultation document was not encouraging; it was largely a defence of the existing committee activities in each House, with no regard to the new circumstances created by the extensive new rule-making powers. The Government—somewhat surprisingly, given their excellent Brexit credentials—seem not to have taken on board that the scrutiny context has changed significantly with the repatriation of financial services regulatory powers from the EU. That context should drive how we see the way forward.
Since our debate in Committee, my noble friend Lord Howe has made available to us the texts of letters from the PRA and the FCA which broadly say that they will do whatever Parliament decides, which is only right and proper. I do not think the letters add much to the analysis of the issues we debated in Committee, but they nevertheless demonstrate a constructive willingness to co-operate with parliamentary scrutiny. When my noble friend responded to our debate in Committee, I was not filled with confidence that the Government really understand the dimensions of the issues around scrutiny and accountability in the context of these additional rule-making powers. I have seen the rather late-in-the-day letter from the Economic Secretary which landed in our email boxes this afternoon. I shall be kind and say that the direction of travel is positive, but we have not yet reached a satisfactory landing point for this debate. I expect we will continue to pursue this issue well beyond the passage of the Bill.
As my noble friend Lord Blackwell knows, I do not support his Amendment 37A because it is a rear-view mirror amendment. I strongly believe that Parliament should have the opportunity to get involved with the rules made by the FCA and the PRA in time to influence their final shape. It is not satisfactory to think that ex-post scrutiny is an effective mechanism for parliamentary involvement. I do not believe the independence of the PRA and the FCA is threatened by this intervention in how rules are made, given the context of the very significant new regulatory rule-making powers expected to be devolved to them. That is why I support the amendments in this group in the names of the noble Lord, Lord Eatwell, and the noble Baroness, Lady Bowles of Berkhamsted, which provide a much better basis for Parliament’s future involvement in additional rule-making powers.

Lord Davies of Brixton: My Lords, these amendments are all on the same broad theme. As the previous speaker mentioned, there is a broad consensus that something needs to be done to provide a formal role for parliamentary scrutiny in the work of financial regulators. I do not want to detain the House, but I will take the opportunity to emphasise points that I have made at earlier stages. The basic question, to me, is: who regulates the regulators? The question is why we should trust the regulators; the answer is openness and engagement. Clearly, we have a particular interest here but can, I believe, contribute massively to the work of the regulator.
For us to raise these issues is not to question the expertise or good will of the people who serve on the regulators’ boards or work in their offices. It is simply wrong to assume that, once appointed, they can be left to get on with the job. As is apparent in the debate, there is clear consensus about the need for scrutiny. That is not contested. Obviously, there are clear reasons why they would benefit—the expertise of this House is a factor—but my particular concern is to establish systems that minimise the risk of regulatory capture. This is the experience, widely found, whereby regulators tend to become dominated by the interests they regulate and not by public interest.
I emphasise that this is not about corruption; it is more, in my mind, a social and cultural problem. I do not think the concept, in theory, is contested. The answer is to strengthen and develop the widest possible involvement of all sorts of bodies in the work of the regulators. Clearly, Parliament has a particular role and these amendments explore possible approaches to it. I hope the Minister can say a bit more than what was in the letter. Does the Minister consider regulatory capture to be something that occurs, and where the systems that are established address it and minimise the risk?

Lord Sharkey: My Lords, I will speak to Amendments 18, 19 and 20 in this group. I support them all but prefer the more prescriptive Amendment 20. In these matters, it seems to me that ambiguity is not our friend. Wide latitude in interpretation can easily frustrate intent. As my noble friend Lady Bowles has so forcefully explained, that intent here is to ensure that Parliament has some effective scrutiny role in the activities and rule-making of the PRA and the FCA, by requiring that the information Parliament may need to do this is properly supplied. At present, this is absent or insufficient or likely to be post hoc and ineffective.
This is a specific example of a much larger problem in the relations between the Executive and the legislature. There is an increasing tendency for the Executive to bypass, or try to bypass, Parliament or to reduce scrutiny to formulaic rituals with no real influence on outcomes, such as our SI procedures. The seriousness of this tendency has been commented on fairly widely and frequently in the past few years.
In September last year the chairs of three of our committees wrote a joint letter to the Leader of the Commons. The noble Lords, Lord Blencathra and Lord Hodgson of Astley Abbotts, and the noble Baroness, Lady Taylor of Bolton, asked the Government to give assurances that skeleton Bills would be used only in exceptional circumstances, that statutory safeguards would be provided to ensure full parliamentary scrutiny of the powers conferred, and that the EM accompanying a Bill would identify that Bill as skeleton when it is, provide a full justification for adopting that approach, and set out again the statutory safeguards put in place to protect the role of Parliament. Mr Rees-Mogg replied in October. He agreed that:
“Bills with substantial powers … should not be a tool to cover imperfect policy development.”
Yet almost at the same time that he was saying that, Parliament was dealing with the Medicines and Medical Devices Bill, which was an undisguised skeleton bill. Speaking as chair of our DPRRC, the noble Lord, Lord Blencathra, described the Bill as containing inappropriate powers and as
“an absolute affront to parliamentary democracy”.
The current Bill is of course not nearly as bad as that, but it raises the key question of how to scrutinise the policies behind PRA and FCA actions and rule making now, in the absence of any European parliamentary scrutiny of new measures—and SIs of course are emphatically not effective substitutes for policy scrutiny, even if they were available to us in the current case.
There is also the further issue mentioned already of evading scrutiny by the essentially diversionary tactic of front-running consultations in parallel with legislation. This tactic—in frequent use—is to deny discussion of policy in legislation by reference to concurrent but unfinished consultations. That is what is happening in this case. Parliament is effectively bypassed. The Executive take the power to make policy or allow others to make policy without having decided, or at least told anybody, what those policies may be.
There are, at my last count, 50 statutory regulators. They are all important, but it is clear that our financial regulators have a special importance that requires special parliamentary scrutiny. Noble Lords will have seen the letters of comfort from the PRA and the FCA on this issue. I interpret the Sam Woods letter as welcoming that special scrutiny. I am much less certain about how to interpret the FCA’s parallel letter. In any event, it is for Parliament to decide what levels and means of scrutiny are appropriate.
That is what the amendments set out to do for the PRA and the FCA. I strongly support them, especially Amendment 20, and I look forward to the Minister’s response, especially with regard to Amendment 20.

Lord Naseby: I thank the noble Baroness, Lady Bowles, for raising these issues. All three of the amendments that she has tabled are important. They are to do with the FCA and PRA regulators, and I agree with them. However, I am particularly concerned about the FCA and its linkage to the Financial Ombudsman Service, the FOS, and how that is reported to Parliament. There seems to me a particular concern in this area.
I will take just one key case history. The leading company in the home-collected credit market has been around for 150 years. It has basically produced a credit product of choice for working-class communities for all that time. It is small-scale. It is now suffering from regulatory indifference. There is a model here for home-collected credit that works. It is flexible and forgiving and is the right design for consumers on a low income. The FCA has traditionally supported it and given it a tick all along the line. To put what has happened bluntly, the Financial Ombudsman Service has ignored the understanding of this market, which is part of the consumer credit loan market, and lumped it all together.
The net result is that the FOS is basically taking a summary judgment approach to complaints involving all HCC firms. It is therefore faced with a huge volume of complaints manufactured by the claims management companies. To get round this huge volume, instead of playing its statutory role and looking at each claim on its merits, it is taking a short cut. It is saying, “Okay, we’ll look at 25 properly; anything above that, we won’t”—and so it goes on. That is quite wrong—so wrong that there must be some parliamentary means of ensuring that the FCA carries out its role in relation to what the FOS should be doing, in the knowledge, of course, that the FOS is an independent body. So there is a lack of linkage somewhere in this, which should be another area for parliamentary scrutiny.
That was only a shorthand case history, but it demonstrates that what is behind the amendments tabled by the noble Baroness, Lady Bowles, has great value. I shall think very seriously about supporting them, depending on what my noble friend on the Front Bench chooses to say in his closing words.

Lord Bruce of Bennachie: My Lords, I am happy to speak briefly to the amendments moved by my noble friend Lady Bowles. I am grateful to her and to my noble friend Lord Sharkey for their expertise both in drafting the amendments and in explaining in detail why it is important for the Government to consider the points behind them.
As a member of the EU Financial Affairs Sub-Committee and, until last month, of the EU Services Sub-Committee, for the last four years, I have been involved with scrutinising the financial services sector. Nobody should doubt the importance of this sector to the UK economy; it is worth reminding people of that, even though this is a technical amendment. I will not rehearse the statistics on the share of the economy, jobs, tax revenues, the balance of payments and so on. Apart from that, it is also the lubricant of the whole economy, and when it goes wrong, a few people make a fortune but most people suffer—some severely.
The regulation of the sector has been subject to the scrutiny of this House and, importantly, as has already been mentioned, the resources of the European Parliament, with British MEPs taking the lead in many instances. My noble friend Lady Bowles was one of the most distinguished of them in that department. Yet the financial crash was the consequence of light-touch regulation and there are concerns that this Bill may be creating a framework for similar mistakes. Certainly, without effective accountability to Parliament there is a danger that regulators might—intentionally, but more likely otherwise—allow financial services to be regulated in ways that could put individuals’ pensions and savings at risk and prejudice the viability of businesses, especially SMEs.
Outside the European Union, it is more important than ever that financial services regulation is effectively scrutinised. Without the resources of the European Parliament, we need a dedicated committee, with the necessary resources and expert support, to ensure that regulation is understood and fit for purpose. We all know that the Government want flexibility in the post-Brexit age in order to compete globally. Of course, that is not wrong in principle, and the sector repeatedly argues that its ability to do so will depend on transparent and effective regulation, because that is what gives confidence to the users of financial services. Get it wrong and, as we stand alone, it could have disastrous consequences.
I also support the argument that requiring financial regulators to engage with Parliament as part of the process of implementing regulation is not obstructive. It actually serves the regulators’ and the Government’s interests much better, because it ensures a better understanding of their purpose and helps highlight whether or not there may be consequences which had not been thought through and which could have negative implications for the sector.
By positive contrast, if the Government, regulators and Parliament can work together as partners, we can consolidate and enhance our world lead. We have been one of the most important financial sectors in the world and we all want that to remain the case, but we have created a challenging and difficult circumstance for ourselves. If we get this wrong, we could suffer a great deal. We need to get it right and it is important that the Government acknowledge that these amendments are designed to support the regulators and the Government in ensuring that our financial sector still has the confidence of the world market it seeks to serve, and is not subject to a closed, unconsulted, unscrutinised form of regulation that, without intention—or maybe with intention, if some Ministers wish to push it—could compromise the integrity of the sector. That will serve nobody’s interests, and I hope the Government recognise that.

Earl of Kinnoull: I call the noble Baroness, Lady Bennett of Manor Castle. We are having difficulties with the noble Baroness, Lady Bennett. We shall move to the noble Viscount, Lord Trenchard.

Viscount Trenchard: My Lords, Amendments 18, 19 and 20 seek to create obligations for the regulators to report to Parliament on what their policies are and what rules they intend to introduce or change. Amendment 18 is the simplest, Amendment 20 is the most prescriptive and Amendment 19 is somewhere in the middle.
These three amendments are all rather strangely worded as undertakings from regulators. Amendment 20 almost implies that it is not taken as a given that there will be a principle of openness and sincere co-operation in assisting a relevant select committee in the conduct of any inquiry. As a member of the EU Financial Services Sub-Committee, and later the EU Services Sub-Committee, I can say that we have often examined senior officers of the two regulators and it has never even crossed my mind that they would not apply a principle of openness and sincere co-operation in giving their evidence.
These three amendments refer to the provision of undertakings from regulators and cover the whole of their activities and rule-making, which is rather too broad and gives the impression that Parliament will act in a direct supervisory role. They do not specify, moreover, how and in what form the undertakings will be given to Parliament.
Contrary to the experience of the noble Baroness, Lady Bowles, the Economics Secretary has been willing on, I think, two occasions in the past year to speak to the EU Services Sub-Committee and has, as far as I know, been very willing to accept the committee’s invitation. Under the excellent chairmanship of the noble Baroness, Lady Donaghy, my noble friend Lady Neville-Rolfe, who is in her place, the noble Lord, Lord Bruce of Bennachie, and I have struggled with these issues and put in a considerable number of hours thinking about them. That experience has certainly informed my remarks today.
Amendments 37A, 45 and 48 seek, similarly, to establish a formal basis for parliamentary scrutiny of the regulators in the exercise of their new rule-making  powers under the Bill. I rather prefer Amendment 37A, in the name of my noble friend Lord Blackwell, because that does not require prior parliamentary approval, which would tend to undermine the independence and authority of the regulators.
Amendments 45 and 48, in the name of the noble Lord, Lord Eatwell, and others, are much more prescriptive and beg the question as to precisely how a “relevant” committee of each House, or indeed a joint committee of both Houses, is to be charged with scrutinising proposals. These amendments compromise too much the regulators’ ability to exercise their powers, and there are at present no parliamentary committees that could effectively perform these duties with sufficient resources.
I very much hope the Minister will tell your Lordships the Government’s proposals as to how parliamentary scrutiny of the regulators’ exercise of the delegated powers should be carried out and how they think the present committee structure will be able to cope with that.
I note that my noble friend Lady Noakes, who speaks with great knowledge and experience of these matters, supports these amendments, and I almost always agree with her. She suggested that my noble friend Lord Blackwell’s amendment involves looking at regulations through a rear-view mirror. I point out that my noble friend’s Amendment 37A mentions the provision of rules to the relevant Joint Committee or committees
“either before taking effect or within 5 days after taking effect”.
The existence of such an obligation would surely ensure that the regulators would maintain an ongoing dialogue with the committees on their policies as they evolve but would not unreasonably restrict or delay their ability to act when necessary.

Baroness McIntosh of Pickering: I find I have a great deal of sympathy with the amendments in this group. Before I address them, what has concentrated my mind as to how I will vote is that I understand there is a business Motion to be considered tomorrow that Standing Order 44, that no two stages of a Bill be taken on one day, be dispensed with on Monday 19 April to allow the Financial Services Bill to be taken through its remaining stages that day, and that therefore under Standing Order 47 we will not have the opportunity to amend on Third Reading. If that is the case, we have to decide today how we are going to deal with this group of amendments and will not have the opportunity to return to them at Third Reading. I wonder whether my noble friend the Minister, in summing up, can confirm that my understanding is correct in that regard.
I am always full of admiration for the noble Baroness, Lady Bowles, and support the main thrust of her Amendments 18, 19 and 20. For once, I find myself in good company with my noble friend Lady Noakes; I hope this trend will continue. As yet I have not persuaded my noble friend Lord Trenchard to join us in this venture, but I believe the noble Baroness, Lady Bowles, has identified reasons for us to support this proposal. Of course it is right that the Government should  consult industry, practitioners and consumers, but what is missing—it is the major omission addressed particularly by those amendments I am minded to support in this group—is any opportunity for Parliament to scrutinise what will be major changes to our law in this Bill.
I was most interested to hear the noble Baroness, Lady Bowles, ask at the end whether Ministers would attend committees when required. I always thought it was the case that they had to have a very good reason not to attend parliamentary committees, but I stand to be corrected when we hear the summing up.
I could not put it any better than my noble friend Lady Noakes as to why I cannot support my noble friend Lord Blackwell’s amendment: it appears to be looking through the rear-view mirror. If anything, we need the opportunity to look at these regulations and provisions before they come into effect. There was a full complement of signatures so I was not able to sign Amendment 45, but I have lent my signature to Amendment 48.
I believe that, whether we adopt Amendment 45 or 48, or Amendments 18 to 20, they have a great deal of merit. As I said earlier, it is an extraordinary omission for the Bill not to provide for advance parliamentary scrutiny and, in the words of my noble friend Lady Noakes, parliamentary accountability of very important regulators in this field. We need only to look back at the financial crisis and subsequent moves to see how important the role of financial services is in the whole economy.
I conclude by responding to my noble friend Lord Trenchard. I do not believe that it is a very good argument to say that we cannot scrutinise the role of regulators because committees do not have sufficient resources. If anything, that is an argument to have more members. Many of us are not able to serve on committees at this time because they do not have enough places, so, if anything, I would support his call for more resources for these committees to ensure that we can. Whichever amendment we adopt—I am sure that this a subject close to the heart of the Deputy Speaker—we must provide the resources and the time to perform a proper scrutiny role in this House. With those few remarks, I am tempted to support Amendments 45 and 48 or Amendments 18 to 20 this afternoon.

Baroness Shafik: My Lords, it is a great pleasure to follow the noble Baroness, Lady McIntosh, and all the previous speakers, who have added a great deal of expertise and judgment to the debate so far. I am grateful for the opportunity to speak on this important group of amendments, which would make sure that there is sufficient parliamentary scrutiny of the regulators, who are the ultimate referees in determining whether financial markets are fair, effective and serve the public interest.
The key question is how to make sure the referees are doing a good job, and there were many excellent proposals put forward today on how to enhance scrutiny, including Amendments 18, 19 and 20 from the noble Baronesses, Lady Bowles and Lady Kramer, Amendment 37A from the noble Lord, Lord Blackwell, and Amendments 45 and 48 from the noble Baronesses,  Lady Bowles, Lady Noakes and Lady McIntosh, and the noble Lord, Lord Eatwell. Those amendments all focus on putting in place reporting requirements to Parliament. I want to focus on who is best placed to receive this reporting, given its highly specialised nature.
I realise that this is an issue not of legislation but of how Parliament chooses to organise its affairs. But what we put in legislation also depends on the institutional structures that are in place, and meaningful scrutiny needs to be adequately supported. I support the recommendations of the All-Party Group on Financial Markets and Services, which argues that to enable effective scrutiny of regulators there needs to be a new Joint Committee of parliamentarians from both Houses with a specific remit for financial services, supported by expert advice—something to which the noble Lords, Lord Blackwell and Lord Bruce, have also referred, as well as the noble Baroness, Lady McIntosh.
I know from my time as Deputy Governor of the Bank of England how technical some of these regulatory issues are. A dedicated joint committee would be able to draw on independent advice and respond flexibly to issues that arise to ensure the public interest is well served. Such an institutional structure would be in the spirit of a principles-based regulatory regime, rather than relying on more detailed legislative approaches. It would also be consistent with the welcome letter sent today by the Economic Secretary to the Treasury to the chief executives of both the FCA and the PRA seeking to have proper parliamentary oversight of financial services regulation in future.
One area where potential parliamentary scrutiny of the FCA and the PRA could be useful is around how their work supports UK competitiveness. I know this is an issue that has already been covered at some length and with great expertise by this House, and I know that many have argued for strengthening the competitiveness objectives for the FCA and the PRA.
I would prefer to stick to the current language for four reasons. First, in my many years of doing surveys of investors at the World Bank, I have never seen easier regulatory standards featuring as a factor that makes a country more competitive. Instead, macroeconomic and financial stability, a skilled workforce and good infrastructure were what mattered most across the world. Secondly, just as you do not want a weak referee in order to have a good game, markets operate best when they are fair to all players. Thirdly, we have been able to support innovation in areas such as fintech through the use of things such as regulatory sandboxes, which allow experimentation while containing risk. Finally, there are many others who do a very good job of promoting financial services in the UK, including Her Majesty’s Treasury, the lord mayor and the many industry associations.
I also suggest that, for the moment, climate change is an area where parliamentary scrutiny, rather than legislation, might be useful. Central banks and regulators around the world are moving quickly to address climate risks. We are in a moment of great innovation, with climate stress testing, improved disclosure requirements, scenario planning, looking at climate exposures on both sides of the balance sheet and enhancing accountability for senior managers. All of this is wonderful,  and I especially welcome the move to setting regulatory requirements for all market participants based on agreed definitions and rules, rather than relying on voluntary approaches and inconsistent criteria.
For now, I am comfortable with requiring regulators to have regard to climate issues—the recent remit letters are a good example of this—with appropriate parliamentary scrutiny of how that is happening. However, we should definitely return to this issue as part of the future financial framework once we have more evidence and experience from current innovations, so that we can codify in legislation the best possible approaches to addressing climate risks. Here as well, having a Joint Committee with access to relevant expertise would only enhance the quality of scrutiny around issues of climate change.
In conclusion, I very much hope that the Minister will be able to further reassure the House of how expert parliamentary scrutiny will enable Parliament to play a key role in future oversight of the regulators.

Baroness Kramer: My Lords, I will pick up some of the comments that have been made during the course of this absolutely outstanding debate on this series of amendments.
The noble Baroness, Lady McIntosh, said that she had never heard of Ministers not attending or coming before committees. I was on the Finance Bill Sub-Committee of the Economic Affairs Committee when we dealt with the loan charge, and, on several occasions, the Economic Secretary, Mel Stride, refused point blank to come and speak to the committee. We were then informed that committees have absolutely no power to summon Ministers; they come only at their own discretion. Mel Stride’s successor, John Glen, took a very different view and came before a combined committee of the Economic Affairs Committee and the Finance Bill Sub-Committee. I make it clear that there certainly are Ministers who very strongly take the view that they can be asked to come before the House but are not required in any way to say yes.
I also pick up a concern that the noble Baroness raised about whether we have to make an absolute decision today. If she looks at the Marshalled List, she may notice Amendment 37F, in my name and that of my noble friend Lady Bowles, which will come up on Monday. In fact, it is deliberately placed to give us the opportunity to listen in full to the Minister and consider this issue but still have an opportunity to make a decision on it if we decide that the Minister’s contribution does not meet the needs of the House. As such, there is an opportunity, should we decide to do so; some may wish to act today, and others may decide that they are satisfied by what the Minister says.
I also pick up the comments of the noble Lord, Lord Blackwell, and the noble Viscount, Lord Trenchard, on the advance parliamentary scrutiny of rules. I very much challenge what they said because, for many years, in the European Parliament and the European Council, parliamentarians had the opportunity to scrutinise both directives and the rules that would flow from them in a very thorough and extensive manner and with the support of a great deal of specialised expertise in the form of specialised and experienced staff.
Then this House had the opportunity to mark its approval or denial, because those rules came forward in the form of secondary legislation. Now, the change that is taking place is not just that scrutiny is being lost at European level, but that—and this is front-run in the Bill, made clear in the consultation on the future regulatory framework and the Government have been open about it—they intend to repeal all the relevant secondary legislation. What was previously secondary legislation will now be relabelled “rules” and come into effect through the regulator’s rulebook only. That is why we have a major issue today. How Parliament will hold those rules accountable after their renaming from secondary legislation to rules is completely unclear. As I say, this is being front-run ahead of the consultation that deals with it.
I am supportive of Amendments 18, 19, 20, 45 and 48, all of which seek to create a framework for accountability, but I appreciate that the Government have tried to make some progress on this. As the noble Baroness, Lady Noakes, and my noble friend Lady Bowles both noted, the FCA and PRA provided letters to the noble Earl, Lord Howe, who was kind enough to make them available to us, setting out their views on accountability in the future. The two letters strike me as remarkably different. The letter from the PRA recognises that a significant layer of scrutiny has been removed, and Sam Woods has said the same in various speeches. Yesterday, I attended an all-party parliamentary group for challenger banks, mutuals and building societies, at which Sam Woods acted as a witness. He made clear then that a level of scrutiny had been removed. While it was not his place to propose what the new scrutiny should be, he recognised that it would not be unexpected for Parliament to require significant additional accountability mechanisms. I do not think I am putting words into his mouth. That at least provides some sense of the situation that we are in and a direction of travel, although it is not for the regulator to propose that scrutiny; it is for the House.
The FCA letter struck me as entirely different. It seemed entirely satisfied with the situation as it is today and did not anticipate the need for additional forms of scrutiny. Two things really raised my hackles in that letter. One was that, in trying to explain accountability, it states:
“We continue to work closely with our HM Treasury colleagues”.
HM Treasury is not Parliament and, when a regulator cannot tell the difference between them, I am exceedingly concerned. It may be in HM Treasury’s interest to be seen as Parliament—I sometimes think, when we take evidence from it in various committees, that that is how it sees itself—but that it is not the situation and it reflects the problem that we are concerned about. Later in the letter, there is an offer:
“We are committed to ensuring that Parliamentarians have the information they need to scrutinise our policy and rule proposals, particularly during consultation. … We are always happy to hear views on and discuss our ongoing work in more detail with MPs, Peers and Parliamentary committees if this is helpful.”
The term “patronising” probably applies to those two sentences.
But let me go back to the all-party parliamentary group I mentioned a moment ago. The meeting was to look at the potential, post Brexit, to create new opportunities for our financial services, particularly the challenger banks and the building societies. As I said, Sam Woods came along as a witness, and brought his head of prudential policy. The FCA declined to attend, despite more than one invitation. I am also a very active member of the All-Party Parliamentary Group for Whistleblowing. We have worked closely over recent years with both Andrew Bailey and Chris Woolard, who have had an open door for the group, because the issues of whistleblowing have been so pertinent and so significant. However, I have to say that Nikhil Rathi has declined to meet the group—although he has offered an alternative.
Those are fairly significant factors in trying to understand where the regulators now see themselves. As I read the language of the regulators, we are to recognise a significant transfer of power. In the case of the PRA, that seems to be accompanied by a recognition that there must be additional scrutiny and accountability, but frankly, I am convinced that that message has not conveyed itself to the FCA. I also read the letter that we got very late this afternoon from John Glen, the Economic Secretary. It was well described by the noble Baroness, Lady Noakes, as a work in progress—a small movement towards understanding the complexity, the significance and the level of activity that must be involved in proper scrutiny by Parliament.
I have one particular question for the Minister, which he may be able to help me with. I gather from a number of conversations that the PRA is to come forward with a new regime. I think it will appear first in a White Paper or a Green Paper, or whatever other colour of paper it may be. These will be new proposals on how, now we have left the European Union, we might change the way we regulate small banks and perhaps other financial services institutions—an entirely sensible piece of work. Presumably, rules will then follow, as a consequence of that piece of work. My understanding from the Minister is that the future regulatory framework will not be in place until 2022, if we are lucky. Under what regime, then, would new rules—for example, those affecting small banks—proceed? Would they be end-run again, as the provisions in this Bill are being end-run? Or would they go through the traditional process of secondary legislation, with an opportunity for Parliament to approve? I do not know the answer, and I hope that the Minister will enlighten us. It seems to me that that question underscores the problem.
My noble friend Lady Bowles said that, by the time we have a regime in place, it will be rather late. So the principles that underpin that regime will have to be agreed much earlier, if there is to be action on new rules and new ways of working within the financial services sector. Given that we have just left the European Union and we are going through a period of change, I cannot but believe that that will be fairly extensive.
I very much look forward to the Minister’s comments. The letter from the Economic Secretary included a “must have regard to”—a useful phrase. Regard must be had to parliamentary responses to consultations. We can argue about whether the consultation process is sufficient or adequate, but that phrase is only in a  letter; it is not in the Bill. I wonder why the Government are not willing to put some of the commitments that they are willing to describe either on the Floor of the House or in letters, into a form that could go on the face of a Bill, and so give this House confidence that the direction of travel is a direction that we can live with.

Lord Eatwell: My Lords, I would like to begin by acknowledging the considerable efforts that have been made by the noble Earl, Lord Howe, to provide greater insight and information in the form of letters from the CEOs of the FCA and PRA, and to encourage the Economic Secretary to the Treasury to provide his letter today, all of which have enhanced and coloured this debate. These letters have been quoted by many speakers. I am most grateful to the noble Earl for his strenuous efforts and commitment to making this legislation useful.
In Committee, we had some valuable debates on parliamentary scrutiny and the activities of the financial services regulators that dealt with the important point that those activities are now entirely repatriated from the European Union. It is clear, as Sam Woods, the CEO of PRA, states in his letter to the noble Earl, Lord Howe, that
“it would seem natural to us that, if some rulemaking responsibilities previously conducted at EU level move to us, Parliament might choose to evolve the way it scrutinises that activity.”
Mr Woods is entirely correct, as the debate this evening has demonstrated.
The role the European Parliament has in the development of financial regulation reflects the EU’s preference for embedding high levels of technical detail in EU primary law. It has been made clear by the Treasury, notably in the consultation document on the regulatory framework review, that the approach to be developed in the UK is to be quite different. It is to be a principles-based approach, in which
“the setting of regulatory standards is delegated to expert, independent regulators that work within an overall policy framework set by Government and Parliament.”
However, it is also evident from that consultation document that in respect of parliamentary scrutiny, there has been an important—shall I say—oversight or error. As was made clear in that document, the FCA and the model of regulation introduced by that legislation continue to sit at the centre of the UK’s regulatory framework. However, it is FiSMA that sits at the centre. FiSMA is the model of regulation that was introduced, but it was produced in 2000, when the UK was a long-standing member of the European Union and UK politicians participated in the scrutiny of financial regulation at EU level. The noble Baroness, Lady Kramer, has emphasised this point.
The Treasury has failed to take into account the need for a different domestic approach to democratic scrutiny now we have left the European Union. Simply reproducing the structures that have worked for the past 20 years, as is done in chapter 3 of the consultation document, is just not good enough. This was the key issue debated on Second Reading and in Committee.
Powers returned from Brussels need to be redistributed between Parliament and the regulators. The nature of that redistribution is at the heart of our discussion.  In the regulatory model adopted by the UK, an increase in the powers of the independent regulators is inevitable and necessary, as I agree they are best placed to take on the many technical functions previously handled at the EU level. But the inescapable conclusion is that this increase in regulators’ powers will need to be accompanied by new checks and balances. The role of Parliament in this new setting is what is at issue in these amendments.
Once viewed in these terms, it is clear that the role of Parliament must evolve as Mr Woods suggests, to include not just issues such as the regulatory perimeter or the alignment with international regulatory norms, such as the Basel rules, but also because financial services regulation sits within a wider set of public policy priorities, as the noble Baroness, Lady Shafik, said. These include economic growth, UK competitiveness, domestic competition, financial inclusion, intergenerational equity and, of course, climate change. The creation of an effective regulatory framework requires that these factors be balanced against the needs of financial services.
This new approach, a balancing approach in which Parliament plays a central role, deserves a label, so I am going to call it the “New Scrutiny”—with a capital N and S. The “New Scrutiny” will involve consideration of policy and rule-making but should go further to encompass performance reviews and impact assessment.
The noble Earl, Lord Howe, argued in a letter to my noble friend Lord Tunnicliffe that the debate on this issue during the passage of the Bill has primarily focused on the regulators’ consultations on draft rules. This is an important part of the regulators’ activities, but the Government view the issue much more broadly —to also encompass their broader work, for example on supervision and enforcement, their operational effectiveness and their strategic approach to delivering their objectives.
I predict that the “New Scrutiny” will become a valued component of the regulatory mechanism in the UK, a beneficial complement to the work of the Treasury, the regulators and the Bank of England. It is clear from the speeches at Second Reading and from the debates in Committee that there is a shared wish on all sides of the House for a platform to be established on which Parliament could play its role by building an appropriate committee structure to accommodate the “New Scrutiny”. That platform rests on three legs of commitment to active, open, transparent engagement in the parliamentary process: the commitment of the FCA, of the PRA and of Her Majesty’s Treasury.
I am grateful to the noble Earl, Lord Howe, as I said at the beginning, for having solicited the written expressions of two legs of that platform in the forms of the letters from the chief executives of the FCA and PRA. I am very pleased that today the Economic Secretary to the Treasury provided the third leg of commitment, hence stabilising the structure. I believe we now have the firm tripartite co-operation that can, if effectively implemented, enable Parliament to instruct an appropriate committee or committees to implement the “New Scrutiny”.
To put the matter beyond doubt, allow me to summarise the substance of the three legs. Sam Woods of the PRA has stated:
“Our legitimacy depends on the role and powers Parliament chooses to allot to us and how we then action that role and powers, and we are absolutely committed to working with Parliament (including its committees) to ensure it has the information necessary to hold us fully to account.”
This view is echoed by Mr Rathi of the FCA, who says,
“we consider that robust accountability and scrutiny is an essential part of an effective regulatory regime. We are committed to exercising our functions in an open and accountable way, and a transparent relationship with Parliament is critical to our ability to do our job well.”
Those are the first two legs, and the third leg has now been provided by Mr Glen, who has argued the following. First, he says, Parliament has a unique and special role in relation to the scrutiny and oversight of the PRA and the FCA. Secondly, he says, the PRA and the FCA must have due regard to the conclusions of any parliamentary scrutiny. Thirdly, he continues, this should include providing a comprehensive response to any relevant parliamentary committees regarding any issues raised as a result of this scrutiny. Mr Glen’s letter also refers to the ongoing future regulatory framework review, which is looking more broadly at the question of how our financial services regulatory framework needs to be adapted for the future. He confirms that the review will include consideration of how we can ensure the proper parliamentary oversight of financial services regulation in future, taking account of any changes that will be made to roles and responsibilities as a result of that review.
I am aware that to rest on any Minister’s predictions of the future is not the safest of things to do. However, given that those words are all in the same letter, I take it as an acknowledgment that in this essentially interim Bill we have forged a tripartite structure, which is not only a structure for today but a starting point for the future new scrutiny.
The financial regulatory framework review will of course bring forth new legislation. I hope it will be a new beginning: a reassessment and rewrite of the ageing, much-revised FiSMA, now approaching its 21st birthday —an eternity in financial services. An important element in the success of the FiSMA of 2000 was the pre-legislative scrutiny by a Joint Committee of both Houses, brilliantly led by the noble Lord, Lord Burns. Similarly, there was a pre-legislative Joint Committee on the draft Financial Services Bill 2012 chaired by the noble Lord, Lord Lilley—the right honourable Peter Lilley, as he then was. In both cases the Government acknowledged that the Joint Committees’ analysis, advice and recommendations were invaluable and resulted in a significant number of amendments to the draft Bills. I hope and expect that those encouraging precedents will be followed once again.
The form that parliamentary scrutiny takes is of course ultimately up to Parliament to decide. But the successful experience of the pre-legislative Joint Committees suggests that the new scrutiny might be embodied in a standing Joint Committee, developing  experience and expertise to make a significant, positive contribution to the development of financial regulation in this country.
It is important to notice that the establishment of such a Joint Committee could be done now. The noble Baronesses, Lady Bowles and Lady Kramer, and the noble Lord, Lord Sharkey, have all expressed the fear that the Government are front-running regulatory reform and that there is inadequate scrutiny of the current view. However, the lack of adequate scrutiny is primarily the fault not of the Government but of Parliament. If there is such strong feeling on this matter on all sides of this House, and I certainly feel strongly about it, then the appropriate scrutiny committee can be established right now. That would also have the advantage of exposing any inadequacies of information of the sort that the noble Baroness, Lady Bowles, fears, should such inadequacies be present. It is up to Parliament to act.
Having said all that about setting the framework that I believe we are establishing, I turn—very briefly, I promise—to the amendments before us. The noble Baroness, Lady Bowles, has provided a menu with three courses, successively embodying richer and richer fare. Amendment 18 is a bit too thin, I think, and not satisfying, while Amendment 19 is rather more filling. Amendment 20 is an outstanding and satisfying feast, so who could possibly want less?
In his Amendment 37A the noble Lord, Lord Blackwell, turns from ingredients to recipe—the way in which the ingredients might be put together. I am afraid that I find his recipe somewhat difficult to follow, since it would appear in part to come into effect only five days after the cake has been baked. This has been referred to as the rear-view mirror.
The amendments in my name, Amendments 45 and 48, are also recipes. They not only outline the relationship between regulators’ rule-making and the opinions of a relevant parliamentary committee or committees but make provision for alternative emergency procedures when Parliament is not sitting. I am afraid that the noble Lord, Lord Blackwell, has clearly and substantially misread my amendments. They allow the regulators to proceed in the way they wish without parliamentary approval. It is simply stated that if they behave in that way, they have to provide an adequate explanation. There is no parliamentary intrusion of the sort that he suggested there might be in these amendments. There is simply a clear role for Parliament to examine rules, procedures and strategies before they are put into effect, and to expect an explanation if Parliament is subsequently ignored.
Amendments 45 and 48 strike just the right balance between Parliament and regulators within the evolving structure of the new scrutiny. Once again, I must say that I am pleased to find versions of those recipes in the Economic Secretary’s letter and very pleased that he has endorsed my amendments. I look forward to the Minister’s reply containing, as it surely will, further suggestions as to how this legislation can be made yet more useful.

Earl Howe: My Lords, it is a pleasure to turn once again to the issue of parliamentary accountability of the financial services regulators, and I thank all noble Lords who have contributed to this good debate.  This is an issue of considerable importance to many in this House and, indeed, has been a central topic of debate during the passage of the Bill.
Each amendment in the group proposes different things but I know that at the heart of them all is a desire for reassurance from me, as Minister, that the Government agree with the regulators that Parliament has a unique and special role in relation to the scrutiny and oversight of the financial services regulators. I therefore take this opportunity to give the House that assurance. It is Parliament that ultimately sets the regulators’ objectives and, of course, right that it has the appropriate opportunity to scrutinise the work of the regulators and their effectiveness in delivering the objectives that Parliament has set them. This most certainly includes the way in which the regulators exercise their rule-making powers but also encompasses their wider work on supervision and enforcement across the financial services sector.
Noble Lords will, I hope, have had a chance to read the letters of 19 March from Nikhil Rathi, the CEO of the FCA, and Sam Woods, the CEO of the PRA, that I have deposited in the House Library and the Royal Gallery. Those letters can properly be interpreted as a commitment to the openness and sincere co-operation which the noble Baroness, Lady Bowles, said she sought. I do not in the least detect the complacency that the noble Baroness, Lady Kramer, said she detected in the letter from Nikhil Rathi. Perhaps I may quote the sentence that she cited. He said:
“We are committed to ensuring that Parliamentarians have the information they need to scrutinise our policy and rule proposals, particularly during consultation”.
I do not detect any shadow of qualification to that commitment. Sam Woods, chief executive of the PRA, wrote:
“When we publish consultations, we always stand ready to engage with Parliament.”
So the regulators have clearly demonstrated that they have heard the views expressed by noble Lords during the passage of the Bill. Despite the reservations of my noble friend Lady Noakes, I hope noble Lords accept that these letters take us forward in a meaningful and material way.
In addition, I can confirm that my honourable friend John Glen, the Economic Secretary to the Treasury, has today written to the CEOs of the FCA and the PRA to endorse the commitments made in their letters and to reiterate the Government’s views on the importance of parliamentary scrutiny. In his letter, the Economic Secretary warmly welcomes the commitments which the PRA and the FCA have made to have an open and transparent relationship with Parliament. The Government are clear about the way in which the regulators should continue to engage with Parliament and provide it with the information it needs to effectively scrutinise their policy and rule-making proposals, particularly during their consultation periods.
Let me also reassure noble Lords that the Government agree that, while the independence of the regulators is crucial to the effectiveness of the regulatory framework, the PRA and the FCA should have due regard to the conclusions of any parliamentary scrutiny of their  consultations. My only qualification to that is to say that clearly regulators will need to make judgments where there is commercially or market-sensitive material in question. The Government also agree that the regulators should provide a written response to parliamentary committees in relation to any concerns they have expressed following that scrutiny. Where appropriate, this may be done through the responses that the regulators publish following their consultations.
I now turn to the amendments themselves. First, I would like to thank noble Lords for the constructive way in which they have approached this issue and the fruitful engagement we have had since Committee.
Amendments 18 and 19 envisage Parliament being given the opportunity to review and make recommendations on all regulator rules and draft rules. The noble Baroness, Lady Bowles, made some very well-judged observations in support of these amendments, and I am grateful to her for having tabled them. I hope she will agree that the Government and the regulators have now demonstrated that they are committed to ensuring that Parliament has the opportunities it needs to scrutinise the rules and draft rules and is committed to responding to any points raised.
The noble Baroness, Lady Bowles, asked me about the powers of parliamentary committees. Select Committees from either House already have the power to review the FCA’s rules at consultation, to take evidence on them and to report with recommendations to influence their final form. The current framework therefore already allows Parliament to play a strategic role in interrogating, debating and testing the overall direction of policy for financial services, while allowing the regulators to set the detailed rules for which they hold expertise.
Amendment 20 would also commit the regulators to meeting with parliamentary committees. Here again, the FCA must already attend general accountability hearings before the Treasury Select Committee twice a year, and the PRA must already appear before the Treasury Select Committee after the publication of its annual report. In addition to these regular hearings, parliamentary committees of both Houses are able to summon the regulators to give evidence on an ad hoc basis, and they do this regularly. I am, of course, happy to commit that Ministers will continue to make themselves available to Parliament on a regular basis, on the matters that Parliament determines are a priority.
I say to my noble friend Lord Naseby in particular that I believe that there are decided benefits to the flexibility of the current arrangements, which recognise the authority of Parliament—and I would emphasise that word “authority”—to direct its interest in the areas that it considers appropriate. As noble Lords have recognised in this debate, the regulators have indicated that they will engage with Parliament in whatever way it determines is appropriate.
I welcome the fact that, in Amendments 45 and 48, the noble Lord, Lord Eatwell, has set out a consultative approach which would support Parliament to play its right and proper role in scrutinising the work of the regulators, without undermining the ability of the PRA and the FCA to set their rules independently.  I also appreciate that he has taken steps to address some of the areas of concern that I had with his previous amendments, such as by enabling agreement to be reached between a regulator and Parliament on shorter consultation periods.
However, the concern that I expressed in Committee remains with regard to the amendments’ application to consultations already undertaken by the time the Bill receives Royal Assent. As I have made clear, implementing rules for the investment firms prudential regime and the outstanding Basel III standards in a timely manner is critical to the UK’s reputation as a responsible and responsive global financial centre. The requirements to lay the consultations in Parliament could unintentionally delay the regulators if laid over a recess, even though a committee could still be running over the recess period. Setting that point of detail aside, I hope that I have persuaded the noble Lord these are not necessary amendments for the Bill, given the commitments that I have made today and the other progress that has been made since we debated this issue in Committee.
To remind the House, the Bill already requires that, in relation to the matters in the Bill, the regulators must set out publicly, at consultation stage and final rules stage, all the information Parliament needs to scrutinise their proposals. This includes detailed explanations for the regulators’ policy choices and how they have considered the wider policy issues to which Parliament and the Treasury ask them to have regard.
The Financial Services and Markets Act 2000 already requires the regulators to undertake these consultations, to consider representations—including those made by parliamentary committees or individuals of this House or the other place—and to summarise and respond to those representations. I have already set out the Government’s expectations in terms of the comprehensiveness of that response. Therefore, I welcome the intention behind these amendments, and hope that I have given noble Lords sufficient assurances that both the Government and the regulators acknowledge that.
Turning to Amendment 37A, I first express my appreciation for my noble friend Lord Blackwell’s continued constructive engagement with the Bill. I welcome the intention behind the amendment, which contributes to the broader debate on how to allow proper parliamentary scrutiny without it negatively impacting the independence of the FCA and the PRA.
The Government agree that Parliament cannot and should not be able to veto rules made by the regulators. However, as I have already set out, it is of course important that Parliament has the opportunity to scrutinise those rules and that the regulators should respond to any issues it raises.
This amendment looks at ex post scrutiny, which the Government agree can be an important component of parliamentary scrutiny. For example, it could allow Parliament to take evidence on how the rules are working in practice. Under the accountability framework in the Bill for the prudential measures, it would also allow Parliament to consider how the regulators have interpreted “have regards” and what impact that has  had on their rules. If a parliamentary committee wants to undertake an ex post review of regulator rules and report on them to the regulators, it is very welcome to do so, and both the regulators and the Government would naturally consider such a review and respond appropriately. Therefore, I do not believe that an amendment of this nature is necessary.
In response to the noble Baroness, Lady Kramer, the PRA is indeed planning to publish a discussion paper on strong and stable regulation—a phrase that we may have heard somewhere before—this year. This may require legislation, in which case the Government would obviously need to consider how and when to legislate.
The noble Lord, Lord Davies of Brixton, spoke about the risk of regulatory capture. This is a risk and we must remain vigilant towards it. However, the Government’s view is that the existing arrangements are broadly right to minimise any risk.
Before I conclude my remarks, I think it is important for me to take a moment to pick up concerns raised by the noble Baroness, Lady Bowles, the noble Lord, Lord Bruce of Bennachie, and my noble friends Lady Noakes, Lady McIntosh of Pickering, Lord Trenchard and others about what will happen after the passage of this Bill. I remind noble Lords once again about the ongoing future regulatory framework review, to which the noble Baroness, Lady Shafik, and the noble Lord, Lord Eatwell, rightly referred. The FRF review is looking at whether any changes are necessary to ensure the proper parliamentary oversight of financial services regulation in the future, taking account of any changes that will be made to the responsibilities of the regulators now that we have left the EU.
I reassure the House that the proposals as set out in the review—where the Government are responsible for legislating for the overarching framework, and the regulators are responsible for the firm-level requirements set out in rules—could only be delivered by further primary legislation. I therefore hope this will reassure noble Lords that, once this Bill is complete, there will be further opportunities for Parliament to set out its position on this issue more broadly, and to consider these issues in the round.
The Government look forward to continuing to engage with a wide range of stakeholders as they consider the future regulatory framework, and most especially to engaging with Parliament on it. The House will understand that I cannot anticipate the announcement of legislation which may form part of the next Session’s programme or any pre-legislative scrutiny which may be associated with it. However, the desire expressed by the noble Lord, Lord Eatwell, in particular that there should be pre-legislative scrutiny, if in due course such legislation were to be brought forward, is well and truly noted. The Government will continue to listen carefully to the views of Parliament as they consider the next steps for that review, respecting both Parliament’s constitutional role and the deep and varied expertise of various Members of both Houses.
My noble friend Lady McIntosh of Pickering asked about procedures applicable at Third Reading which, with the agreement of the House, will be taking place next Monday. I can confirm that it will not be possible  to return to these amendments at Third Reading. Having said that, I am very hopeful that we can resolve the issue to everyone’s satisfaction today as a result of the assurances that I have given. I hope that they have convinced your Lordships that the Government recognise and respect the unique and special role of Parliament regarding the scrutiny of the financial services regulators. Given this, I hope I have persuaded noble Lords that their amendments are not necessary and that they therefore should not press them.

Baroness Bowles of Berkhamsted: My Lords, we have had a long and interesting debate, showing unanimous appetite for scrutiny by Parliament, recognising at least from Parliament’s side that there are changes happening now and that therefore this enhanced scrutiny also has to happen now. As the noble Baroness, Lady Noakes, has said—echoed by my noble friend Lady Kramer—this is still a work in progress and, yes, perhaps the direction of travel is going in the right direction.
I thank the noble Lord, Lord Eatwell, for giving us the new vocabulary of the “New Scrutiny”, which certainly makes it easier to identify what we are talking about. I agree with the noble Lord that it is up to Parliament to decide the mechanisms of its own scrutiny. To some extent, that is why I phrased my amendment as I did in the context of undertakings from the regulator. I think I gave the game away in the sense that I said it was to induce discussion about the points I had put in. That we have had.
The Minister has acknowledged that we have a unique and special role and the right to scrutinise the work and effectiveness, including rules, supervision and enforcement. He has acknowledged that there must be openness and sincere co-operation. I want to flag that, and it is important that we have touched on that in this debate. It is also helpful to have confirmation that there must be due regard for the opinions of Parliament.
We are still to some extent perhaps a little behind the curve of where we need to be if it is thought that a couple of appearances a year before the Treasury Select Committee and maybe some ad hoc appearances—the implication is that they might be rare—are sufficient. I did not quite get an answer about whether the regulators could ration their appearances, and nor was there really any response to what my noble friend Lady Kramer highlighted about a certain reluctance by the FCA to participate in the APPGs and some of the other wider operations and scrutiny that happen in Parliament. I hope this debate will have been enough to draw that to attention and maybe rectify that behaviour.
One thing that really still troubles me about what the Minister said was his caveat, when he said the regulators may have to have regard to commercial or market-sensitive data. That was precisely the point of some of my Amendment 20 suggestions. Some information may have to be in confidence, because there is still this point about how the rules are calibrated. Yes, you can have all the philosophical and policy explanations of what lies behind the rules, but the fact of the matter is that one does not necessarily get the  data to check whether those rules have landed in precisely the right place. This is something Parliament should be able to check, even if it is done in a confidential manner if that data would be of a commercial or market-sensitive nature. It is something that the European Central Bank has conceded to the relevant committee of the European Parliament, and I do not really see why we have to be more secretive than it is. That does not seem to put us in the front line of where a modern regulator should be.
Therefore, the caveats that are put in do rather undermine the attempts to tell us we are going to have the relevant level of information. I think there is still a little bit of denial going on, on the side of the Government, at least, about the fact that there is all this front running going on. They still do not want to give even a single line in a piece of legislation acknowledging that the Parliament needs to have the ability to respond now to that front running. Well, it will be up to the Parliament, and I accept that it is also up to individual members of the various scrutiny committees, to do their work. I hope that the debate today has been a taster, perhaps, of the strength of feeling that might develop on some of these committees.
As I said, my amendments today were really to try to draw the Minister, as I have to some extent, and other noble Lords helped very greatly with all their very good and thoughtful contributions. There is still time for more consideration before we get to the final day of Report, and, as my noble friend Lady Kramer noted, there is still another amendment on this topic to debate and other votes to be taken. So, I will not be pressing my amendments today. I may well return to this general topic and that other amendment on Monday, but today, I beg leave to withdraw Amendment 18.
Amendment 18 withdrawn.
Amendments 19 and 20 not moved.

Baroness Henig: We now come to the group beginning with Amendment 21. Anyone wishing to press this or anything else in the group to a Division must make that clear in the debate.

Amendment 21

Lord Sharkey: Moved by Lord Sharkey
21: After Clause 40, insert the following new Clause—“Interest rates for mortgage prisoners(1) The Financial Services and Markets Act 2000 is amended as follows.(2) After section 137FD insert—“137FE FCA general rules: interest rate for mortgage prisoners(1) The FCA must make general rules requiring authorised persons involved in regulated mortgage lending and regulated mortgage administration to introduce a cap on the Standard Variable Rates charged to mortgage prisoners and to ensure that mortgage prisoners can access new fixed interest rate deals at an interest rate equal to or lower than an interest rate specified by the FCA.(2) In subsection (1)—  “mortgage prisoner” means a consumer who cannot switch to a different lender because of their characteristics and has a regulated mortgage contract with one of the following types of firms—(a) inactive lenders, or firms authorised for mortgage lending that are no longer lending; and(b) unregulated entities, or firms not authorised for mortgage lending and which contract with a regulated firm to undertake the regulated activity of mortgage administration;“new fixed interest rate deals” means the ability for the consumer to fix the rate of interest payable on a regulated mortgage contract for periods of 2 years and 5 years;“Standard Variable Rate” means the reversion rate which is a variable rate of interest charged under the regulated mortgage contract after the end of any initial introductory deal.(3) The general rules made under subsection (1) must set the level of the cap on the Standard Variable Rate at a level no more than 2 percentage points above the Bank of England base rate.(4) The general rules made under subsection (1) should make new fixed interest rate deals available to mortgage prisoners who meet the following criteria—(a) are up to date with payments or have aggregate arrears of no more than one monthly payment in the past 12 months,(b) have a remaining term of 2 years or more,(c) have an outstanding loan amount of at least £10,000, and(d) have not received consent to let the property.(5) When specifying the interest rates for new fixed interest rate deals required by subsection (1) the FCA should specify rates for a range of Loan-To-Valuation (LTV) ratios taking into account the average 2-year and 5-year fixed rates available to existing customers of active lenders through product transfers.(6) The FCA must ensure any rules that it is required to make as a result of subsection (1) are made not later than 31 July 2021.””Member’s explanatory statementThis new Clause would require the FCA to introduce a cap on the Standard Variable Rates charged to mortgage prisoners and, under specified circumstances, ensure their access to fixed rate interest deals.

Lord Sharkey: My Lords, Amendments 21 and 37B are in my name and those of the noble Lord, Lord Stevenson of Balmacara, and my noble friend Lady Kramer, and I am very grateful for their support. I declare an interest as co-chair of the APPG on Mortgage Prisoners. The plight of these mortgage prisoners was discussed extensively—

Baroness Penn: My Lords, due to the technical issues that the noble Lord, Lord Sharkey, is having, I suggest that we adjourn for five minutes until a convenient moment after 8.28 pm.
Sitting suspended.

Lord Sharkey: I was saying that we have made no progress in Committee on the mortgage prisoners problem, and the situation seems frozen. On the one hand, there are 250,000 mortgage prisoners,  subject to real, undeserved and unwarranted financial pressure, which is likely to increase when Covid concessions lapse or are withdrawn. On the other hand, the Government and the FCA seem intent on minimizing the problem and are engaged in what seem to me to be futile and unproductive arguments with the mortgage prisoners over exact figures.
The alleged 0.4% premium paid by mortgage prisoners above the average SVR illustrates the point. We do not only believe the figure to be wrong for the reasons that I set out in Committee, which were not refuted by government; we also believe that such discussions are very largely a distraction and lead nowhere. SVRs are not the norm in mortgage lending but are the literally inescapable norm for most mortgage prisoners. Only around 10% of customers with active lenders pay these high SVRs, and more than 75% of those who do switch to new and much lower fixed rate deals within six months of moving to an SVR. Mortgage prisoners have been stuck with usurious SVRs for over 10 years.
Solving the mortgage prisoner problem certainly requires reducing this usurious SVR, but it also requires giving the mortgage prisoners access to normal fixed-rate mortgage deals. I regret to say that there has been no real progress in either of these areas. In all the discussions about the problem, I have never heard the Government admit responsibility for causing it in the first place. I have heard repeated assertions that the Government are trying to find a solution. I have heard John Glen, the Economic Secretary to the Treasury, say that he remains open to considering practical solutions, and I know that the Chancellor told Martin Lewis that he would keep working on the issue and was committed to finding a workable solution.
However, I have heard no admission from the Government that they caused the problem in the first place—and no admission of moral responsibility for devising a proper, just and timely solution. Certainly, nothing so far proposed or actioned has delivered effective relief to the 250,000 prisoners. I again make the point that these people are not the authors of their own misfortunes: the Government are.
The mortgage prisoners are all victims of the Treasury’s incompetence or its greed, or both. The LSE report makes this perfectly clear when it says:
“The borrowers themselves were not to blame.”
Martin Lewis has said:
“Mortgage prisoners have been left paying obscene interest rates for over a decade, through no fault of their own.”
The fact is that current discussions with Government and the FCA appear to be going nowhere and the latest FCA/Treasury move to loosen affordability tests has not resulted in significant take-up.
The mortgage prisoner report of last month—[Connection lost.]

Baroness Penn: My Lords, once more we will need a brief adjournment due to technical issues. I beg to move that we adjourn until 8.30 pm. Or do we have the noble Lord?

Lord Sharkey: Yes.

Baroness Penn: Ignore me. Please go on, Lord Sharkey.

Lord Sharkey: Thank you. I think I was talking about Amendment 21 being prescriptive; it sets out exactly what must be done and by whom.
It has two sections. The first reduces the currently usurious SVR paid by mortgage prisoners by capping it at two percentage points above the bank rate. This is what, in the end, Martin Lewis thought was necessary. He said:
“Yet in lieu of anything else, I believe for those on closed-book mortgages it is a good stopgap while other detailed solutions are worked up, and I’m very happy the All-Party Parliamentary Group on mortgage prisoners is pushing it.”
He also said:
“This would provide immediate emergency relief to those most at risk of financial ruin … No one should underestimate the threat to wellbeing and even lives if this doesn’t happen, and happen soon.”
This is all necessary, but not sufficient. SVRs are not the normal basis for mortgages, as I have already mentioned. What is needed is access to fixed-rate mortgages, as provided by normal active lenders to 90% of mortgagees. The second part of Amendment 21 sets out how that is to be done.
This is, of course, all very prescriptive, and we understand the Government’s reluctance to write such details into the Bill. That is why we have also tabled Amendment 37B. This amendment takes a simpler and non-prescriptive approach. It places the obligation to fix the problem squarely on those who caused it—the Treasury. It is explicitly fuelled by the overwhelming and undeniable moral responsibility that the Treasury has for the terrible situation in which mortgage prisoners have long found themselves. The amendment sets out what must be achieved to relieve mortgage prisoners, by whom and by when, but it does not say how. It leaves that entirely for the Government to work out.
Amendments 21 and 37B give the Government a clear choice. Amendment 21 prescribes a detailed method of solution; Amendment 37B says what the Government must achieve but leaves the mechanism to them. The Government caused the mortgage prisoner problem, which has caused and continues to cause much suffering to many families. I hope that the Government will recognise their moral responsibility and adopt Amendment 21 or Amendment 37B.
This has all gone on much too long, and it has caused, and continues to cause, far too much misery and desperation. If the Minister is not able to adopt either amendment, or give equivalent assurances, I will test the opinion of the House. I beg to move Amendment 21.

Lord Stevenson of Balmacara: My Lords, I speak in support of the amendments just proposed by the noble Lord, Lord Sharkey, which I have signed. One’s heart goes out to him—it must be very difficult to make a speech of this complexity and passion with all these breaks. Despite the technical difficulties, however, he has made the case for action very well, and as co-chair of the all-party parliamentary group on these issues he is very well briefed on the situation faced by these fellow citizens of ours, and the extra costs that  they face. It is indeed a very difficult situation, and one hears a lot of despair when one talks to these people.
I am sure that when he responds the Minister will, as the noble Lord, Lord Sharkey, hinted, dwell at length on the numbers of this group in various categories. There is of course a debate on how the prisoners can be split up—I think that the only thing that we agree on is that the total is probably about 250,000. As with the noble Lord, Lord Sharkey, however, my argument is not about the numbers. Simply put, it is clear that a significant number of people, through no fault of their own, cannot exercise the choices about their mortgage that the rest of us can. While some would argue that this is the direct fault of the Government, I think that someone needs to take responsibility for providing a fair outcome for those who are in a position to take advantage of it.
As the noble Lord, Lord Sharkey, says, this group of amendments offers two options: one that focuses on what the FCA might do within the parameters set by the Bill and another—37B, a late amendment that we drafted for Report—that suggests that the Treasury might wish to take powers to act in the way that is most suitable for it. Both have merits, in their ways. As the noble Lord, Lord Sharkey, said, they have detailed implications that need to be followed through carefully. My preference would be for Amendment 37B, for the very good reasons set out by the noble Lord, Lord Sharkey. If, as he said he might, the noble Lord decides to test the opinion of the House, we will support him.

Baroness Noakes: My Lords, the amendments in this group are misconceived, for a number of reasons that I shall explain. I have much sympathy with the plight of mortgage prisoners, who find themselves in a difficult position as a result of taking on debt when market conditions and regulation allowed mortgage lending in ways that are not generally possible now. We have to remember that many of the borrowers we are talking about would not qualify for a mortgage in today’s environment, either because of the type of mortgage that they have or their own financial circumstances. This is not to blame them, but it is a relevant fact.
Mortgage prisoners are not the only groups who are facing financial problems. Covid-19 has brought financial stress for many individuals and families, and indeed the problems of mortgage prisoners may have increased during the pandemic. Any solutions for mortgage prisoners need to be put in the context of all who are facing debt problems, and we must be careful that solutions for one category of financial distress are fair and proportionate.
Covid-19 has also caused delays in the implementation of the FCA’s initial solution, which relaxed the regulatory affordability rules. We do not, therefore, know how effective those will be in solving the problems of mortgage prisoners, and we should be wary of leaping to further solutions until existing remedies have had time to take effect.
Although a number of statistics have been cited by the supporters of the amendments, hard data on the mortgage prisoner population are not readily available.  This was underlined in last year’s report by the London School of Economics, and the FCA has never claimed to have a perfect picture. Although the report by the group UK Mortgage Prisoners purports to offer a definitive analysis, its membership is only a fraction of the number potentially within the mortgage prisoner net, so its report should be treated with appropriate caution. It is hard to make policy in this environment.
The amendments include a cap on standard variable rates—SVRs—for all mortgage prisoners with inactive or unregulated lenders, plus two approaches for making new fixed-rate deals available to those who are basically good payers. The proposal to cap SVRs responds to a fairly vociferous demand from lobby groups. Amendment 21 would cap SVR rates at 2 percentage points above base rate. The result would be a rate broadly aligned with the competitive rates available in the active mortgage market, but those rates are available only to low loan-to-value ratios, and to borrowers with the most robust financial profiles. The market rates for riskier high LTVs are probably twice that level, even if the personal financial profile of the borrower is resilient. In addition, there is not an unlimited supply of fixed-rate deals. Many lenders simply do not offer fixed-rate deals on high LTV loans, especially when combined with weaker personal financial profiles.
The amendment says that mortgage prisoners with inactive or unregulated lenders should have rates that are available only to other mortgage borrowers who have completely different loan and borrower characteristics, and it would apply to them even if they did have opportunities to switch mortgages, which the FCA estimates is roughly half the total population. It is unsurprising that the LSE did not recommend this, and noted that it could create market harm. The FCA’s own analysis, comparing the rates paid by mortgage prisoners who are stuck on SVRs and cannot switch, indicates that the real problem is only about 40 basis points, if the correct comparator is used. I do not accept the assertion of the noble Lord, Lord Sharkey, that that is an incorrect calculation. Those 40 basis points are no proper foundation for market intervention.
As the noble Lord, Lord Sharkey, explained, the proposals for the availability of fixed-rate mortgages for good payers in Amendments 21 and 37B take slightly different approaches. Amendment 21 says that FCA rules should
“make new fixed interest rate deals available to mortgage prisoners”,
while under Amendment 37B the Treasury must provide for them to be offered fixed-rate mortgages. Neither amendment says how this can be achieved.
In the case of Amendment 21, it would be a startling new direction for regulation if the FCA could tell regulated lenders that they were obliged to offer particular deals to people who by definition are not their own customers. As for Amendment 37B, clearly the Treasury will not itself be providing loans, as it is not in the business of retail lending. The Treasury also has no power to tell banks or building societies to make any particular loans. If either of the amendments resulted in regulated mortgage providers being told that they had to lend to certain groups of non-customers, the impact on the financial services industry would be chilling.
It might be possible for the Treasury to procure that regulated lenders offered fixed-rate deals if the Treasury itself guaranteed all or part of the debt, as it does for some first-time buyers. But that is not what Amendment 37B says, and it would not be a plain reading of the proposed new clause to cover such an intervention.
As if telling lenders what products they should offer and to whom were not bad enough, both amendments go on to try to cap the price of these fixed-rate deals. Amendment 21 would do this at a rate to be fixed by the FCA, using LTV ratios and average rates available to customers of active lenders. This ignores the basic fact of life that mortgage prisoners who have not remortgaged are not like other borrowers, and do not satisfy the lending criteria of most mortgage lenders—whether that is because the LTVs are too high or because the other financial characteristics of those borrowers place them outside the risk appetite of active lenders. For some borrower circumstances there is no market rate at all, and it is not right to assume otherwise.
Amendment 37B is slightly more realistic and refers to terms being “no less favourable” than offered to mortgage borrowers who have “similar creditworthiness characteristics”. However, the issue is not just about creditworthiness; it is also about the nature of the mortgage itself. The mortgage prisoner population includes those on interest-only mortgages with no repayment plan. It also includes buy-to-let mortgages. When these characteristics are added to the higher LTVs and lower financial resilience that are often present in the mortgage prisoner population, it can add up to more risk than mortgage lenders would be comfortable with in today’s environment. There will likely be no comparable fixed-rate terms available for such mortgages, and this amendment cannot wish away that fact by assuming that only creditworthiness is relevant.
Regulatory rules require lenders to manage their own risks. The FCA has been careful in its pronouncements, to date, to respect the fact that lenders have to be responsible for their own credit risk assessments, how they price for risk and how they set their risk appetite. Anything else is on a slippery slope to moral hazard. How can the FCA regulate a lender’s credit risk policies if the FCA is itself overriding that lender’s credit risk appetite? How does it impact prudential regulation by the PRA? We simply should not go there.
Ministers have said clearly that they want to find a solution for mortgage prisoners. In fact they probably need multiple solutions because there are several problems at work within the mortgage prisoner population. Solutions that might seem right for one category of borrower may well have repercussions across other parts of the mortgage market or other retail lending markets. It would be incredibly foolish to legislate without a full understanding of these issues. I hope the proposers of the amendments will accept that we should leave it to the Treasury and the FCA to work out practical solutions to these problems.

Lord Holmes of Richmond: My Lords, it is a pleasure to take part on this group of amendments. I declare my financial services interests and say just this: the borrowers are not to blame, but they bear the burden. Does my noble friend the Minister agree?
In agreeing to a large extent with my noble friend Lady Noakes, with regret I am not convinced that these are necessarily the amendments to resolve the issue. Can the Minister set out what action he believes the Treasury and FCA are taking in this area? There clearly is an issue even if we accept that the numbers may be disputed, or that there are different categories and specific circumstances. These are all important points to be considered, but they still leave issues to be addressed. Will the Minister set out anything he can about what actions the Treasury will take and what the approach of the FCA will be to address these points?

Baroness Bryan of Partick: My Lords, it is a great honour to participate in this group of amendments, and particularly to support the noble Lord, Lord Sharkey, who has worked tirelessly to support mortgage prisoners. I feel I am in a similar place to my noble friend Lord Griffiths of Burry Port when he spoke in Committee. I will speak as someone inexperienced in high finance but who understands the importance of having a home—not as a financial asset or investment, but as somewhere safe and secure to live. To make this most basic need a pawn in the machinations of greed-driven financial transactions, as demonstrated by the financial crash of 2008, is an absolutely unacceptable face of capitalism.
Every Government since 1979 have encouraged people to see home ownership as a sign of virtue. When the noble Lord, Lord Heseltine, was Secretary of State for the Environment, he said:
“Home ownership stimulates the attitudes of independence and self-reliance that are the bedrock of a free society.”
But for many people, the period of their mortgage is a rollercoaster ride of anxiety, always dependent on matters far outside their control. The day the mortgage is paid off must rank among the best days of people’s lives. Many mortgage prisoners fear they will never see that day.
The FCA reported in July 2020 that around a quarter of a million people have their mortgages held by inactive firms. The majority of these people were up to date with their payments and, in any other circumstances, would have been able to adjust their mortgages and repayment patterns to suit their individual needs. No one would choose to remain on the SVR for years on end, so to compare their entrapment on that rate to those who may be on it temporarily, while they seek an alternative, is disingenuous. These people have been denied that opportunity, not through any decision they made or any fault on their part, but because of the way the Government chose to sell off mortgage loan books. It was not just people’s mortgages that changed hands, it was people’s lives—they were being bought and sold.
This Bill was viewed with real optimism among some mortgage prisoners. They thought amendments relating to SVR would help transform their lives, but  how often have they been here before? Last year, there was hope that the FCA’s more lenient affordability checks would help some escape, but very few succeeded. For many more, their lives were made even more difficult by the impact of Covid-19. The report from the LSE in November 2020 makes the point that the FCA has now reached the limit of its powers. This means that only the Government can help to free mortgage prisoners. Instead, while Parliament was considering amendments aimed at protecting mortgage prisoners, the auctions continued. All the warm words and expressions of concern from Ministers meant nothing. The Treasury’s sole concern was that these people must deliver value for money for the Government.
These amendments are considered and cautious. Their implementation would not undermine capitalism or fundamentally damage the whole system of mortgage delivery, but would give some safeguards to a specific group of mortgage prisoners who have struggled for more than 10 years as victims of the failure of the very system the Government are defending. If it is not to be these amendments, what help will the Minister offer? Unless there is a clear alternative, I hope we will be given the opportunity to vote on at least one of them. I would be very pleased to give my support.

Lord Lucas: My Lords, it is clearly acknowledged that there is a problem. It is evident to me that this is exactly the sort of problem that the Government ought to sort out because, as my noble friend Lady Noakes said, we have no business landing this on the lending community. It is our responsibility. The Bill is an opportunity to make sure that something is done, and I very much hope that we take it.

Baroness Kramer: My Lords, I think the case has been extremely well made. I usually really respect the opinions that the noble Baroness, Lady Noakes, puts forward, but it seems to me that she completely fails to understand the circumstances that led these people into being mortgage prisoners. They took out loans under credit checks and it was entirely appropriate, but the banks from whom they borrowed the money crashed in the 2008 financial crisis, largely through poor regulation, which lies at the Government’s door, not the door of those who took out mortgages. People with absolutely identical credit profiles who took out their mortgages with a bank which did not crash have had many opportunities to refinance, which is normal in the life of the mortgage. A standard, typical bank knows that it will vary the characteristics of its mortgage over the life if that option is sought by the mortgagee.
The group of people who took out their mortgages with banks that crashed in many cases found that those mortgages were stripped out as part of the asset rescue process that the Government went through, and the Government then sold those mortgages to completely inappropriate buyers under inappropriate terms in order to get the maximum return. I understand their motivation—maximum return for taxpayers—but they removed all of the normal relationships and embedded rights in those relationships that a mortgagee has when they take out a mortgage with a viable financial institution.
The noble Baroness treats many of those mortgage prisoners as people who are now of poor credit. These are people who have aged—we all do that. The mortgage that we take out at the age of 30 is not the same one that we would be able to take out at the age of 55, because we have got older and our career profile is different. Some of them have become ill, and therefore had reduced earning capacity. Any standard bank dealing with a mortgagee in those circumstances makes adjustments. Mortgage prisoners are not able to seek such adjustments and they have been left in dire circumstances.
The fault lay with the Government when they sold mortgages under inappropriate terms to inappropriate buyers to manage them. It treated them as though they were abstract assets, rather than a special category which has a lot of convention embedded in it, in order to maximise their sale. I very much hope that the Government will realise that they have a responsibility. They took those additional revenues, they took the benefit of selling off those mortgages under terms and conditions that they should never have permitted, and they now need to offset that by stepping forward and making sure that those mortgage prisoners can have the same access to flexibility that would have been theirs had they taken that loan out with a financial institution that did not collapse in 2007-08.

Lord Tunnicliffe: My Lords, this is an emotive issue for a lot of people. Although we recognise that the Government have taken steps to help a proportion of so-called mortgage prisoners to access alternative products, so far, we have not been satisfied with either public or private assurances received on this matter. We are familiar with the Government’s view of the importance of market freedoms and the need to keep interventions to a minimum. However, despite the initiatives that we will hear about from the Minister shortly, the fact is that the market is failing a substantial number of people.
This situation has left many mortgage customers essentially trapped in their current properties, even if those properties no longer meet their needs. Mortgage prisoners have faced years of financial difficulties as well as the anxiety and potential for ill health that comes with that. It is therefore only right that the Government take this opportunity to act.
Luckily, the proposals before us provide the Treasury with a route out of this situation. Amendment 21 would introduce requirements on the FCA to place a cap on the standard variable rate charged to mortgage prisoners and to take supplementary steps to improve their access to alternative deals. Amendment 37B aims to achieve a broadly similar goal through different means, giving the Treasury greater flexibility to take this matter forward.
The Minister will, no doubt, tell us that these amendments go too far. We disagree. I hope that Amendment 37B is something that the Government could live with. If the Treasury is not happy with the precise wording, will the Minister at least commit to tabling an alternative proposal at Third Reading next  week? We have pressed repeatedly for concerted action to deal with this issue and provide hope to thousands of mortgage prisoners. We favour Amendment 37B over Amendment 21, but that is the lead amendment and will be the first to be called. I very much hope that the Minister will accept the need to make progress but, if not, we will support the noble Lord, Lord Sharkey, if he pushes one of his amendments to a vote.

Lord True: My Lords, I thank those who have spoken. I have to say to many of them that, with great respect, I will disagree that these amendments are appropriate or effective. I must make absolutely clear that there is no prospect of the Government changing their position between now and Third Reading.
I want to start by emphasising, however, that the Government take this issue extremely seriously. I believed that that was understood in the private conversations that I felt privileged to have with Peers from all around the House and that the earnestness of Ministers in this area was understood and respected. I hope that that is the case, even if we disagree today.
We have a great deal of sympathy for mortgage borrowers who are unable to switch to new deals, which is why we and the FCA have carried out so much work and analysis in this area. The FCA has determined that there are around 250,000 people whose mortgages are currently held by inactive firms. That figure has been used by the noble Lord, Lord Sharkey, and others. The noble Lord, Lord Stevenson of Balmacara, said that I might detail different categories of people within that number and implied that that would not change the position. However, as my noble friend Lady Noakes observed, Parliament must surely legislate on the basis of actual numbers and evidence of the reality of the problem overall. While that figure is the total number of customers whose mortgages are held by inactive firms, not all those people are “prisoners”. Half of them, 125,000 mortgage holders, could switch to an active lender if they chose to. They could do so right now, without any action or intervention from government at all.
The Government have sought to make it as straightforward as possible for customers with inactive firms to switch. Whenever we have sold loans back to the private sector, we have included protections to ensure that customers’ ability to remortgage is unaffected. For example, the customer protections in previous sales of Bradford & Bingley and NRAM loans have included restrictions on the ability of lenders to impose financial barriers to remortgaging such as early repayment charges.
This means that there are around 125,000 borrowers with inactive firms who cannot switch, and the Government fully accept that that remains a significant number. Within that number, every household is a household of people. However, around 70,000 of those borrowers are currently in arrears. The Government do not underestimate how stressful it can be to be in arrears, but it is important to note that borrowers in arrears with inactive firms are in a similar situation to borrowers in arrears with active lenders. In both cases, it is not possible to move to a new fixed rate deal and it is not possible to switch lender. Customers in arrears  with either inactive firms or active lenders have the same protection under the FCA’s conduct rules, whereby firms are required to make all reasonable efforts to explore arrangements to resolve the situation.
Around 55,000 customers are up to date with their payments but are also unable to switch. These consumers are constrained from switching because they do not meet the risk appetite of lenders in the active market. This is not to blame or accuse people in this position—of course, the Government do not do that, and I repudiate any such implication—but it is a simple point of fact that these borrowers have risk characteristics meaning they are unable switch to the active market. However, FCA analysis has found that, despite this, on average the 55,000 borrowers with inactive firms who have characteristics that would make it difficult for them to switch but are up to date with payments are paying around 0.4 percentage points more than similar borrowers with active lenders who are now on a reversion rate, which will normally be their lender’s standard variable rate.
There has been considerable scrutiny of this figure, and the noble Lord, Lord Sharkey, simply claimed it was wrong, so I will take a moment to explain the analysis that underpins it. The FCA used its regulatory data returns, information from the third-party administrators who service these mortgages, and credit reference agencies to compare the interest rates paid by borrowers with inactive lenders to borrowers with similar characteristics in the active market. As my noble friend Lady Noakes stated, consumers with these kinds of risk characteristics would not be able to easily access new fixed rate deals in the active market. It is not the case that borrowers with similar high credit risk characteristics can access the lowest rates in the active market. Where they can access new fixed rate deals with active lenders, these will tend to be specialist lenders who will charge much higher rates than the major lenders.
My noble friend Lord Holmes of Richmond reasonably asked what the Government are seeking to do. Importantly, the Government, working with the FCA, have created additional options for some of these 55,000 borrowers who are with inactive firms but are not in arrears. This involves a new process, for which I believe time should be allowed, that permits active mortgage lenders to waive the normal affordability checks for borrowers with inactive lenders who meet certain criteria, for example not being in arrears and not wishing to borrow more. This is called the modified affordability assessment.
Inactive firms have been contacting borrowers who have been struggling to switch, setting out that new options may be available for them in the active market. I am pleased to tell the House that a number of lenders, including major lenders like Halifax, NatWest and Santander, have also come forward with options specifically for these borrowers. I encourage all borrowers with inactive firms to consider whether they may be able to take advantage of this new switching process. While this may not be a silver bullet for all borrowers with inactive firms, it represents a significant change for borrowers with inactive firms who may previously not have been able to switch.
The Government have taken other action in the period of Covid to help and support borrowers. In October, the FCA confirmed additional options to support borrowers, including guidance to allow borrowers who are up to date with their payments with a recently matured or soon-to-mature interest-only or part and part mortgage to delay repaying the capital on their mortgage while continuing to make interest payments. This guidance is in place until October 2021. The FCA also confirmed, as I have explained, that it is making intra-group switching easier for borrowers with an inactive firm; that is, the same lending group as an active lender. Furthermore, in September the Money and Pensions Service launched online information and a dedicated phone service for borrowers.
We have also considered the regulation of customers with inactive firms. It is important to be clear that all borrowers with regulated mortgages must always have their mortgages administered by a regulated firm—this is the case for both inactive firms and active lenders. Some inactive firms, such as Landmark Mortgages and Heliodor Mortgages, are also regulated by the FCA already.
As the Economic Secretary to the Treasury and we have explained, the Government are always open-minded about whether further regulation would deliver greater protection, but we are yet to see evidence to suggest that there are borrowers who are currently being harmed by the current regulatory regime in relation to borrowers in the active market, and who would therefore be helped by extending the FCA’s remit.
Amendments 21 and 37B seek to provide additional protections for borrowers with inactive firms through direct price intervention by the FCA and the Treasury. Amendment 21 seeks to cap standard variable interest rates for borrowers with inactive firms. My noble friend Lady Noakes spoke powerfully on the implications of this policy. As I have discussed, borrowers with similar characteristics in the active market are unlikely to be able to secure new fixed-rate deals in the active market. As my noble friend argued, a cap for borrowers in the inactive market would be deeply unfair to higher-risk borrowers or those in arrears with active lenders, who would continue to pay normal reversion rates, which would be higher than the cap proposed.
Capping SVRs on mortgages with inactive firms would also have an impact on their financial stability because it would restrict lenders’ ability to vary rates in line with the market conditions. I know that some in the House found my noble friend’s speech uncongenial, but this is a fact. This concern was supported by the London School of Economics’ recent report on mortgage prisoners, which stated:
“Capping SVRs at a level close to the best rate for new loans could create harm in other parts of the market, and we do not recommend it.”
Both Amendments 21 and 37B would also require inactive firms and unregulated entities to offer new fixed-rate deals. On Amendment 21, it is not clear how the FCA should take account of the range of features and characteristics that inform interest rates in the active market—for example, product fees or borrower   characteristics. Amendment 37B seeks to require the Treasury to implement regulations that provide fixed-rate deals to customers with inactive firms that are in line with deals available to borrowers in the active market with broadly similar creditworthiness characteristics.
As I have noted already, FCA analysis has made clear that borrowers with inactive firms who are up to date with their payments but unable to switch on average pay just 0.4 percentage points more than customers in the active market with similar characteristics who are now on the reversion rate. Therefore, it is not clear that this amendment would lead to materially lower rates for most consumers with inactive firms.
Being with an inactive firm does not stop a consumer from applying for mortgages in the active market. Consumers in the inactive and active market applying for new credit are assessed in the same way. Consumers in the inactive market are already able to access mortgage products available to consumers in the active market with broadly similar creditworthy characteristics.
Finally, both Amendments 21 and 37B would require firms that do not currently have the expertise, systems or regulatory permissions necessary to offer new mortgage products to do so.
I reiterate that the Government do not underestimate the stress that being unable to switch your mortgage can cause. I also reiterate that the Economic Secretary has stated the Government’s concern and interest in seeking ongoing solutions to this problem. However, in making policy we must be guided by the evidence, which demonstrates that consumers with inactive firms are not in fact significantly disadvantaged versus their peers in the active market, and we must be fair to those borrowers—to all borrowers—in any steps we take. In view of this and the proportionate range of interventions that the FCA has already taken, some of which I set out in the earlier part of my speech, I ask that the amendment be withdrawn.

Lord Sharkey: I thank everybody who has taken part in this extensive debate. I particularly thank the noble Baroness, Lady Bryan, for her powerful contribution and her clear understanding of the problems that mortgage prisoners suffer, and have suffered for so very long.
I was sorry to hear the Minister again talk about the 0.4 percentage points and assert that it was a meaningful figure. At this point in the debate and at this time of the night, all I can do is say that we disagree fundamentally with his analysis. We think it is completely wrong and we think we have the evidence to show it is.
In some ways, more important than all that is that the tenor of the debate, or the tenor of the contributions made by the Minister and the noble Baroness, Lady Noakes, was notable for the fact that they do not assume any kind of responsibility on the part of the Government for the situation these people find themselves in. There is no hint of moral responsibility and no sense that, really, it is up to government to find the solution. As it happens, the noble Baroness, Lady Noakes, finished her speech, I think, by recommending that we leave all this to the FCA and the Treasury to find  a solution. The fact is that we have left it to the Treasury and the FCA to find a solution, and they have not found a solution at all.
Nothing in the Minister’s speech suggests that a solution is on the horizon. He talked about the loosening of the affordability checks, but I repeat what I said in my speech: so far, the loosening of those affordability checks has helped 40 households. He had the opportunity to try to correct that figure; he did not take it. It is 40 households so far. This is not the solution, and nothing else is proposed by the FCA or the Treasury to solve the problem that still exists.
I conclude by saying that it is the Government who have caused this problem; it is the Treasury. There is a moral responsibility. People’s lives are ruined, have been ruined and will be ruined if this situation continues. It may be that the proposals we have put forward are not perfect—although I certainly dispute that they amount to significant market distortion, if any—but, nevertheless, they would bring relief to these people. There are a lot of them, they are in bad shape and their lives are difficult, and it is no fault of their own. I would like to test the opinion of the House.
Ayes 273, Noes 235.

Division conducted remotely on Amendment 21
Amendment 21 agreed.
Amendments 22 and 23 not moved.

Baroness Fookes: My Lords, we now come to the group beginning with Amendment 24. Anyone wishing to press this or anything else in this group to a Division must make that clear in the debate.

Amendment 24

Baroness Neville-Rolfe: Moved by Baroness Neville-Rolfe
24: After Clause 40, insert the following new Clause—“Requirement to report to Parliament on impact on businessesThe Treasury must publish an annual report on the impact of measures taken by the FCA, PRA and the Government to regulate financial services, particularly on small business, innovation and competitiveness.”

Baroness Neville-Rolfe: My Lords, I shall speak to my Amendment 24 on reporting. I remind the House of my interests as a director of Secure Trust Bank and Capita plc.
The amendment would require the Treasury to publish an annual report on the impact of measures taken by the FCA, the PRA or the Government to regulate financial services, with a particular focus on small business, innovation and competitiveness. While there has been a great deal of excellent discussion during the passage of the Bill on holding financial services operators to account, we can lose sight of the value of smaller operators, including those based outside London. Moreover, innovation can bring huge value to consumers: just think, in our own lives, of online banking, money transfer overseas and customer share trading. Moreover, our strained economy will not recover without a proper focus on the competitiveness of the UK’s financial sector, which provides the veins and arteries of our economy.
I know from my experience in intellectual property how valuable an annual report to Parliament of this type can be in focusing ministerial and staff attention. Writing the report is a complement to the usual in-tray, the relentless focus on short-term risk and the avoidance of political banana skins; I am afraid these often exercise public servants to the detriment of more strategic thinking, and I speak as someone who used to be one. I believe that a strategic look once a year would raise thinking above the proverbial parapet and help the financial services sector to stay ahead in the new world, but can I persuade the Minister?
I will leave others to speak to their Amendments 25 and 37, but I will say that I took some comfort from the Minister’s reply to me on impact assessments in Committee, which is why I did not retable my amendment. He confirmed that both regulators, the FCA and the PRA, have a disciplined routine and a proper approach to impact assessment, and they understand that the sunlight of transparency must shine through. What is less clear is how easy it is to access those assessments, those nuggets of judgment and estimation. Could the Minister reassure us that there will be a decent system of signalling new proposals and that PRA and FCA impact assessments will be available to Parliament, perhaps through the public websites? We need to see and understand their proposals, and we need to do that routinely if we are to exercise our parliamentary  scrutiny function properly, which has been an issue of great debate throughout the passage of the Bill. I beg to move.

Amendment 25 (to Amendment 24)

Lord Sharkey: Moved by Lord Sharkey
25: After Clause 40, after “business,” insert “consumer protection,”

Lord Sharkey: I will be brief. Amendment 24 continues the themes underlying Amendments 18, 19 and 20, proposed by my noble friend Lady Bowles. The amendment concerns the provision of vital information, as did those amendments. The noble Baroness, Lady Neville-Rolfe, has explained the purpose of her amendment with her usual force and clarity, and I agree with every word she said.
The assessment of impact is essential to proper scrutiny, but it seems to me that there is an omission in the noble Baroness’s amendment. Amendment 24 requires the Treasury to
“publish an annual report on the impact of measures taken by the FCA, PRA and the Government … particularly on small business, innovation and competitiveness.”
The amendment does not include consumer protection in this list. My Amendment 25 simply inserts this alongside the other particularised areas.
Consumer protection is already an objective of the FCA. The Financial Services Act 2012 inserted new Section 1C, which sets out that the “consumer protection objective is”, rather unsurprisingly,
“securing an appropriate degree of protection for consumers.”
The same Act also imposes an obligation on the FCA to promote competitiveness, one of the specified categories in Amendment 24 of the noble Baroness, Lady Neville-Rolfe. This obligation is qualified and, in some ways, secondary to the consumer protection objective. The Act says that the promoting competitiveness requirement has to be “compatible with the advancement” of consumer protection. Both are important and seem to me to merit the same standing in Amendment 24.
I recognise that the PRA has no such direct obligation to consumer protection. However, its general objective is set out in Section 2B inserted by the 2012 Act, and it clearly implies an element of consumer protection. The Government themselves have a clear interest and involvement in consumer protection directly, if they consider it necessary.
Consumers need protection, perhaps now more than ever: scams multiply, malfeasance grows and people lose their pensions and life savings. The resourcefulness and inventiveness of the dishonest seems to know no bounds. Just as it is important to know the impact of measures taken to regulate financial services in general, and on small businesses, innovation and competitiveness in particular, so it is important to know the impact of measures taken to protect consumers. There are already many of these measures and there will be more as new ways of fleecing consumers are devised. We need to know what we are doing in combating them all—what works and what does not. Amendment 25 would enable this in the way proposed by Amendment 24. I beg to move.

Baroness Bennett of Manor Castle: My Lords, I apologise for the need to withdraw from the previous two groups, but I return to speak to Amendment 37 in my name, which was also kindly signed by the noble Lord, Lord Sikka. I look forward to his contribution to this debate.
I hope noble Lords recall that I had a similar amendment in Committee, in a debate rather truncated by the pressure of time. At that stage, I circulated an associated briefing addressing what is commonly called the finance curse or the problem of too much finance—the subject of growing and now extensive academic and policy commentary, which prompted this amendment. That briefing discussed, as I canvassed then at some length, the cost of too much finance, which was calculated for the UK between 1995 and 2015 as £4,500 billion, or 2.5 years of average GDP across the period, by Professor Andrew Baker and colleagues at the Sheffield Political Economy Research Institute.
I will not go through all that again, but I will go back to the exchange that I had with the noble Earl the Minister through Committee about the source of the Government’s figure, stated as the value of the financial sector to the UK and set at £76 billion in tax receipts. As was acknowledged, that includes £42 billion borne by customers in the form of VAT and by employees in the form of income tax and national insurance contributions.
The noble Earl kindly acknowledged to me by letter, after my initial question, that the source was PricewaterhouseCoopers, clearly not an independent source without an individual interest in playing up the financial sector of which it is part; although, to be fair to PwC, it does not claim, in that figure, to count costs. It is looking at only one side of the equation and adds the rider that it has
“not verified, validated or audited the data and cannot therefore give any undertaking as to its accuracy.”
I wonder, given that I raised this question in Committee, whether the Minister has given any more thought to, or asked any more of his officials about, how they might look at the complete equation—the costs and benefits of the financial sector. Perhaps if the Government are not prepared to accept this amendment, or write one along their own lines, they could look into this in other ways. That is the key question I put to the Minister tonight.
I provided Members last time with that one calculation —one massive cost—but surely, if the Government are making decisions that will impact on the size of the financial sector and, in consequence, other areas of the economy, they have, or at least plan to have, a methodology for doing that. As your maths teacher might have said, you need to be able to show your working and have a result you arrived at yourself—or at least that you can source to an independent, respected reference.
When we talk about finance, people often feel daunted and concerned about apparently technical matters, so I shall draw a parallel with something many people in communities around the land are well familiar with: the planned arrival of a new out-of-town supermarket that promises 100 or so new jobs and growth for the town—a calculated economic benefit. Permission is  given, the supermarket is built and then the residents notice, a bit later, that one week the greengrocer closes down. A few weeks later, the butcher’s goes. Then the stationery shop that supplied lots of small businesses also closes down. Spending has not increased but shifted. There is a limited market, a limited amount of resources, and they have been shifted to one central location.
That analogy works rather well for the financial sector, not just because, as I talked about last time, a maths PhD graduate going into finance is not going into manufacturing, agricultural research or considering education statistics, but because the financial sector, particularly the most lucrative parts of it, is overwhelmingly concentrated in London—indeed, within the City of London that is often used synonymously with the financial sector, even if a huge percentage of the actual money is held offshore in tax havens. I am sure that some Members of your Lordships’ House will leap up to point out that there are jobs in cities around the land. That is true, but that is not where the real money is.
It was clear that from the noble Earl’s answer in Committee that the drafting of my amendment then was unclear, so I have attempted to tidy it up somewhat. I have clarified the reference here to inequality, to explain that I am talking, at least chiefly, of regional inequality: that is something, of course, that, with the Government’s levelling-up agenda, I would expect them to be greatly concerned about. After Committee, I also honed the reporting areas, taking out references to risks that were not the major aim of the amendment.
I hope that the meaning is clear now, for in his answer in Committee I am not sure the Minister, although I acknowledge that the pressure of time undoubtedly truncated his answer, grasped a major point of the “too much finance” argument. He referred to the Bank of England’s Financial Policy Committee having the responsibility to identify, monitor and take action to remove or reduce systemic risks, and the Office for Budget Responsibility producing and presenting a fiscal risks report to Parliament every two years. In his answer in Committee, the noble Earl said that
“the FCA and PRA are required to prepare and lay annual reports before Parliament, assessing how effectively their objectives have been advanced. These objectives are set by Parliament”.—[Official Report, 10/3/21; col. GC 733.]
However, what this amendment aims to do is to produce the information that could inform those objectives, to see whether the finance sector, as the SPERI report suggests, and as I would contend, is too large. How can those objectives be set in a fog, relying only on a clearly partisan source of data not presenting a complete picture?
The Buddhist text Udāna, dating back to about 500BC on the Indian subcontinent, refers to a group of blind men each touching part of an elephant. That produces a great deal of disagreement, as they debate what it actually is. I have my own view of the financial sector—I doubt that Members of your Lordships’ House have much doubt about what that is—but I am not asking your Lordships’ House, or the Government, to take my view, but just to have a complete, full view of the costs and benefits.
For the avoidance of doubt, I am not planning to push this amendment to a vote this evening. This is, as I think my speech has made clear, a continuing discussion which I plan to continue to push the Government on, which I also invite opposition parties to do—and, indeed, Members from the Government’s side, including the noble Baroness, Lady Neville-Rolfe, who in her Amendment 24, as she often does, calls for a cost-benefit analysis or impact assessment, an approach that would be improved and strengthened by Amendment 25 in the names of the noble Lord, Lord Sharkey, and the noble Baroness, Lady Kramer. Both speakers thus far have stressed the need for information for proper scrutiny. I ask them to join me in thinking about the need for a full and complete view of what is undoubtedly the financial sector elephant stomping across the British economy.

Viscount Trenchard: My Lords, my noble friend Lady Neville-Rolfe is a tireless advocate of impact assessments. I support her proposal to require the Treasury to provide an annual impact assessment of the regulators’ activities. Some of our existing financial services regulation, such as AIFMD, Solvency II and parts of MiFID II, has already had a devastating effect on small business, innovation and the competitiveness of our financial markets. My noble friend’s Amendment 24 will mitigate further damage that might otherwise be done by the application of disproportionate or unduly burdensome rules.
The FCA’s first operational objective is consumer protection, so I do not understand the purpose of the noble Lord, Lord Sharkey, and the noble Baroness, Lady Kramer, in Amendment 25, which I think would make my noble friend’s amendment read rather strangely. It is a pity that the Minister is not willing to raise the importance of competitiveness of the markets as an objective of the FCA, but, in any event, I hope he will agree that the consumers’ interests are not assisted by measures that damage competitiveness, innovation and small businesses.
Amendment 37, in the names of the noble Baroness, Lady Bennett of Manor Castle, and the noble Lord, Lord Sikka, also refers to impact assessments in its heading. But it is too wide in its coverage. It is not reasonable to make the regulators responsible for matters such as poverty, regional inequality and economic development. Market distortions such as those which would be created by the adoption of this amendment would have an adverse effect on prosperity and economic development across the country, creating more poverty and reducing the scope for the alleviation of regional inequality such as the Government are championing through their levelling-up campaign.

Lord Sikka: My Lords, I congratulate the noble Baroness, Lady Bennett, on her amendment and her speech. I would like to speak to Amendment 37. The amendment requires the FCA and the PRA to embrace social responsibility by considering the impact and costs/benefits of the financial services industry. Currently, that receives little attention. There are such obligations on companies—in other words, they have to embrace social responsibility—so why not on regulators?
The noble Baroness has drawn attention to the finance curse upon the UK, which has inflicted at least £4,500 billion-worth of damage to the UK economy. It would be helpful to hear from the Minister about the limits of this negative impact on the UK and whether there are any limits to the growth of the finance industry, which can drive out other industries. After all, other industries also have to compete for resources.
For far too long, the social effects of the finance industry have been dismissed as externalities, and little weight is attached to them in any annual report of the FCA or the PRA. Under the Financial Services and Markets Act 2000—FSMA—the FCA is required to
“promote effective competition in the interests of consumers in the markets for regulated financial services and services provided by a recognised investment exchange”
in carrying out certain regulated activities.
The FCA website states that one of its duties is to
“make markets work well—for individuals, for business, large and small, and for the economy as a whole.”
What analysis supports the claim that the FCA actually does this? It is hard to see how any of its statutory objectives can be met or demonstrated to have been met in the absence of any cost-benefit analysis, especially relating to the disappearance of bank branches or the very restricted access to financial services by the masses. This point was raised earlier by the noble Lord, Lord Naseby; I reuse it as an example to illustrate the failures of the FCA.
The absence of bank branches has a direct impact on poverty, regional inequality, economic development, production, distribution and the consumption of goods and services. The FCA acknowledges that 27.7 million adults at the moment are experiencing vulnerability to poor health, low financial resilience or recent negative life events. This is an increase of 15% since February 2020, when 24 million people were considered vulnerable. Yet no formal assessment is offered by the FCA as to why this is, what the role of the finance industry is and how these negative impacts can be alleviated.
I return to the issue of bank branches. Bank branch networks are a vital part of the financial infrastructure, but they have been shrinking at an accelerating rate, with many town centres and districts having no bank branches at all. Some banking services began to be provided by post offices—or bank branches moved into them—but they are closing too. Cash machines are also vanishing and increasingly require a fee, especially those located in the poorest areas. I have seen cash machines charging up to £4.99 for a withdrawal in a relatively poor area of London.
Branch closures result in exclusion from access to financial services. Many citizens, especially the elderly and those in low-income groups, do not have access to fast broadband connections or a computer. Computers in local libraries and homes are not necessarily secure and online fraud is a major risk. Strong signals for smartphones are not available throughout the country and there are too many blackspots. People without computers and smartphones cannot easily access any financial service. This cannot easily be reconciled with  the government policy of reducing exclusion from financial services, and the FCA has not really said much about it.
The closure of bank branches means that the banking market is not working well, as many individuals and businesses are unable to access timely and effective financial services. Maybe the FCA interprets the “competition objective” given to it in very narrow economic terms and neglects the social dimension of making markets “work well”. It has done little to address the consequences of branch closures.
The closure of bank branches has severe consequences for financial services, local economies and the erosion of local competition. Bank branch closures impose costs on people, such as going to the next town for your banking: that is, the money spent on transport, the time taken up, extra pollution emanating from travel to the next town, road congestion and searching for the nearest suitable financial services facility—and, of course, there are cyber risks as well.
Some people may well trek to another town with a bank branch, but affordable and efficient transport from many locations, especially in rural areas, is not necessarily available. Trekking to another town is not an easy task for the elderly, the infirm, women with small children, or local entrepreneurs just keeping their head above water. A trader cannot afford to close business for a day, or half a day, to visit a bank branch in another town. In any case, the additional travel generates extra pollution and damages the environment. When people visit another town for their banking services, they end up doing their shopping there, which means that the local economy in the place where they live is also damaged.
Without local bank branches, local shopkeepers, traders and the self-employed cannot easily bank cash takings and cheques. This then increases the risks that they face. Without a local branch, banks cannot easily build an intelligent picture of local businesses, risks and opportunities, and thus cannot provide required financial support for local economies. One study has estimated that bank branch closures dampen SME lending by 63% on average in postcodes that lose a bank branch. This figure grows to 104% for postcodes that lose their last bank branch in town.
The closure of local bank branches increases commercial decline, as I indicated earlier, because people end up shopping in the town where they go for their banking. This accelerates economic decline and has effects on the local housing market, as well as on the provision already made for schools, healthcare and other facilities.
In the absence of local banking facilities, many people, especially the low-paid, may become victims of the payday lenders who charge exorbitant interest rates.
The amendment tabled asks the regulators to discharge their duties because, currently, it is one-way traffic: traffic from the state, taxpayers and people to the banks, and very little in return. On behalf of citizens and taxpayers, the state has bailed out banks; provided quantitative easing to lubricate their liquidity; acts as a lender of the last resort; provides almost free raw  material—that is, cash with very low interest rates; protects bank deposits of up to £85,000; and bolsters the bank customer base, and thus the ability of banks to sell services to newer customers, because the state insists that social security payments are made through banks. What exactly is it that the banks offer the public in return? It is hard to see what we are getting in return. We are not getting competition in financial services; we are not getting bank branches that are open and accessible to the masses. There appears to be no quid pro quo from the finance industry. All that people are getting is shrinking access to financial services.
The FCA, as a regulator, has a duty to see that the markets work well for everybody. It has not done so. How can it deliver that duty when people simply do not have access to financial services or have very restricted access?
It is quite likely that, in meeting the objectives of the proposed amendment, the regulators might actually talk to normal people and ask how they are affected by changes in the financial services industry. If this amendment was to be enacted one day, I hope that it would make the regulators more people-friendly.

Baroness Noakes: My Lords, at this late stage of the evening I shall not try to emulate the previous speaker’s length of contribution—indeed, I shall deliver a slightly shorter version of what I had originally intended to say. I speak in favour of Amendment 24, in the name of my noble friend Lady Neville-Rolfe.
Amendment 24 focuses on ex post analysis of the impact of changes introduced by the regulators or the Government. It therefore gives us a different lens on the impact that interventions have had in practice. My noble friend normally focuses on impact statements, which are ex ante evaluations and often suffer from highly questionable assumptions and confirmation bias. When we deal with ex post analysis, however, we can rely on outcomes and facts. That kind of analysis is really important when helping to shape policy going forward or correcting any mistakes in policy already introduced, so I support this amendment. I personally would not have gone for an annual report, because the ability to see the cumulative impact of changes is quite important but difficult to track in an annual report. However, a report is an extremely good idea.
The noble Lord, Lord Sharkey, has tried to add a consumer focus to the report that my noble friend Lady Neville-Rolfe has proposed. I think it is better focused on small business, innovation and competitiveness; to add consumer matters would dilute the focus of that report. I am not against a report on consumer protection but it would not help to stick it in the middle of something focusing on issues such as competitiveness.
The noble Baroness, Lady Bennett of Manor Castle, will not expect me to support her Amendment 37. The analysis we got from her and the noble Lord, Lord Sikka, seemed to be of a world I do not really recognise. I believe the financial services sector is a great success story for this country and makes a big contribution to our economy. A number of the things that noble  Lords cited seemed to be clinging to an outdated bricks-and-mortar vision of what banking is really about; frankly, that is not the world we live in today. Just as we have seen that bricks-and-mortar retail is not the way forward, it will not be for banking either. We must not keep tying ourselves to the way things were in the past.

Baroness Kramer: My Lords, given the hour I shall also be very brief, but I have to say I rather like the amendments in this group. I like Amendment 24, as amended by Amendment 25—I do not care if it is a separate chapter. But it is quite dangerous to get tangled into issues around competitiveness without making sure there is a lens on consumer protection at the same time. Many small businesses fall into the consumer category in reality, certainly the micro end of small businesses.
What I like about this amendment is: what you measure, you manage. We are so constantly focused on change, new regulation and new rules, without ever going back and looking at the consequences of what we have done and trying to identify what worked, what did not and where the gaps are. It seems that this proposal goes absolutely in the right direction.
There is something interesting in Amendment 37 because one of the big questions that has never been answered is: how does our financial services industry impact on the real economy, in contrast to something much more circular within the financial services economy? I do not think that one is good and the other bad but they are very significant questions, particularly in a country where we have such a dominant investment banking culture, which does not necessarily provide a wide range of relevant services to a great deal of our economic base—particularly our small business base. There is a very interesting question wrapped up in all of that. The approach of saying “We need to look at this in a serious and consistent way, perhaps regularly” strikes me as important when feeding the strategy which then informs the way in which the regulator, the Treasury and the Government behave.

Lord Eatwell: My Lords, Amendments 24 and 25 develop the notion of an information system—the information that will be provided by the FCA, PRA and the Government to feed into an assessment of the performance and impact of the financial services sector and the regulators. Amendment 37 goes much wider, as one might have gathered from its presentation, seeking to make, or ask for, a general economic assessment of the role of financial services generally within the UK, particularly the impact of the various regulators and the Treasury.
One of the themes particularly around the discussion of Amendment 37 was that this is not done. There are shelves of academic books that do this, and there are libraries of this material, but what has not happened is that it has not been brought together and assessed in a decision-making environment on a regular basis. The problem with Amendment 37 is that it asks the FCA and the PRA to—to use a phrase that has become popular today—mark their own homework. They are not really the right people to assess themselves; there  are plenty of research institutes around this country that do a first-class job of assessing exactly these issues. However, we have not brought them together very well. What is so valuable about Amendments 24 and 25 is that they are targeted on that bringing together—bringing information into what I have called the “New Scrutiny”.
I would be interested to hear the Minister reflect, when he sums up, on the information role that is represented by the amendment of the noble Baroness, Lady Neville-Rolfe, and the role that that sort of information system will play in our regulatory future.

Earl Howe: My Lords, Amendments 24, 25 and 37 return to an issue that I know is of keen interest to many in this House. They seek to introduce requirements to publish reports on the impact of financial services regulation and to undertake assessments of the impact of the financial services sector on the UK more broadly.
The noble Baroness, Lady Bennett of Manor Castle, many not feel able to assent to what I am about to say, but, as we consider this topic, we should remind ourselves of the vital role that the financial services sector plays in our economy, employing more than 1 million people nationwide. It is also a critical source of tax revenue, which has proved especially important during these difficult times. We can argue about how we should calculate the precise amount of such revenue, but, by any measure, it is very substantial. We also should not forget the role that the sector plays in enhancing the nation’s standing abroad. The UK exported over £50 billion-worth of financial and insurance activities in 2019, a trade surplus of £41 billion.
Amendment 24 would require the Government to publish a report on the “impact of measures” taken by the FCA, PRA and the Government to regulate this most important financial services sector. In particular, it seeks understanding of the impact of measures on small businesses, innovation and competitiveness. Amendment 25 would add “consumer protection” to the list of things that the Government would be required to report on.
Lest there be any doubt, the Government are wholly committed to ensuring that the financial services sector supports competition, innovation and competitiveness. I hope that this is evidenced by the last set of remit letters issued to the FCA and the PRA by the Chancellor, which requested that the regulators have regard to these three priorities when advancing their objectives and discharging their duties.
In respect of reporting, the FCA and the PRA both have a statutory objective to promote effective competition. What does that involve? It involves promoting a financial services framework that supports new firms to enter the market and grow, promotes innovation and allows successful, innovative firms to grow and thrive. Those, surely, are the key aims for the sector when we talk about effective competition.
I remind my noble friend Lady Neville-Rolfe that both regulators are obliged to prepare annual reports that analyse the extent to which their objectives, including this competition objective, have been advanced that year. Those reports are in turn laid before Parliament for scrutiny. Moreover, I should say to her that, under  the Financial Services and Markets Act, the FCA and the PRA are required to publish cost-benefit analyses when proposing new rules. The regulatory initiatives grid, a relatively recent innovation, sets out the regulatory pipeline that allows the financial services industry and other interested parties to understand and plan for the timings of initiatives that may have a significant operational impact. The grid is published at least twice a year, so Parliament has a forward look at upcoming proposals in a material and transparent way.
Turning to my noble friend Lady Neville-Rolfe’s point about small firms, in my letter to her of 2 March, I set out the Government’s actions to support smaller innovative firms to grow to their full potential, including through the FCA’s regulatory sandbox and our support for the fintech sector. The amendment would therefore duplicate reporting obligations and arrangements that already exist.
I should also note the new accountability frameworks that the Bill puts in place for prudential measures. These require the FCA and PRA to have regard to UK competitiveness, among other things, when making rules to implement Basel or the investment firms prudential regime. Furthermore, the regulators will then be required to report on how having regard to competitiveness has affected their proposed rules.
On consumer protection, which is the subject of the amendment, let me first reassure noble Lords that the protection of consumers is at the heart of our existing regulatory framework. The FCA has an operational objective to secure an appropriate degree of protection for consumers and is required under the Financial Services and Markets Act 2000 to consult a consumer panel on the impact of its work. The panel ensures that consumers play an integral role in the regulator’s rule-making and policy development.
The FCA has repeatedly demonstrated its commitment to consumer protection. One of the key areas of focus in the FCA’s Business Plan 2020/21 is,
“ensuring…that the most vulnerable are protected”.
The FCA has also recently published guidance on how firms can treat vulnerable customers fairly. As consumer protection is one of the FCA’s statutory objectives, as set out in FSMA 2000, the FCA must already report on how consumer protection has been advanced in its annual report, as outlined earlier. Therefore, as with a previous amendment, the amendment would duplicate reporting that already exists. As regards the PRA, it is important to remember that it already has an important role in protecting consumers indirectly by promoting the safety and soundness of PRA-authorised firms. This means that consumers are protected from the significant distress and suffering caused by disorderly bank failures.
I now turn to Amendment 37, which would require regular reports on the impact of the financial services sector on a range of topics, including economic development and regional inequality. I have already set out some examples of the overwhelmingly positive impact that the sector has on jobs, productivity and tax revenues across the whole UK.
On the question of economic development, a key role of the financial services sector is to provide funding to the real economy. The Government have recognised that in this Bill. The provisions on the implementation of the Basel standards require the PRA to have regard to the likely effect of its rules on the ability of the firms affected to continue to provide finance to businesses and consumers in the UK, on a sustainable basis, in the medium and long term.
On regional inequality, an issue that was raised in Committee—and touched on by the noble Lord, Lord Sikka—I can reassure noble Lords that the Government are committed to harnessing the power of the financial services sector to nurture growth across all parts of the UK.
The noble Lord, Lord Sikka, spoke in some detail about access to cash and bank branches. The Government recognise that access to cash is extremely important to millions of people and many businesses across the country. That is why we have committed to legislate to protect access to cash; we will return to this issue on the final day of Report, next Monday.
In the remit letters issued to the FCA and PRA on 23 March, the Chancellor asked them to have regard to the Government’s objective of supporting high-skilled jobs and facilitating finance for productive investments across the country. This will help to ensure that the financial services sector delivers for consumers and businesses no matter where they are in the UK.
All the topics raised in these amendments are ones that the Treasury and the regulators consider every single day when making financial services policy. I can also assure the House that the Government are committed to ensuring that the sector has a positive impact, not only for consumers but for the economy as a whole. Given all this, I ask that these amendments be withdrawn.

Lord Sharkey: My Lords, I find myself agreeing with both the noble Baroness, Lady Neville-Rolfe, and the noble Earl, Lord Howe, and so I have nothing more to say except to beg leave to withdraw Amendment 25.
Amendment 25 (to Amendment 24) withdrawn.

Baroness Neville-Rolfe: My Lords, I thank all noble Lords who have taken part in this debate. I also thank the Minister for reminding us of the contribution of the financial services sector to our economy, and for his summary of the remit letters. I particularly thank the noble Lord, Lord Sharkey, for Amendment 25, and am grateful for the support across the House for the idea of ex-post reporting—perhaps bringing things together a little bit better than the existing system of reporting, which has been outlined, currently does.
I emphasize, however, that I am very flexible and would be happy to have a report less often than once a year. As my noble friend Lady Noakes said, that could encourage more depth. We should also look at some of the difficulties; my noble friend Lord Trenchard reminded us of collateral damage, for example in the case of MiFID.
In any annual report that the Treasury might bring forward—if we were able to persuade it—I am also content to see consumer protection considered and assessed, although it might perhaps be better as a separate report. I know from my own experience in banking that, at present, this is not the main problem area. There is, rightly, a focus by the regulator—particularly the FCA—on protecting the consumer. However, especially in the medium to longer term, other things matter as well: the buoyancy and dynamism of smaller firms; innovation—whoever its parent—and innovation in fraud, as we have been reminded; and competitiveness. They all feature in my amendment.  If we fail to think about these things properly, the consumer—and consumer protection—is the loser.
Amendment 37 in the name of the noble Baroness, Lady Bennett, is much broader in focus, but I think it has sparked some useful reflections about the benefits  as well as the costs, about opportunity costs and indeed about how we cope with the great change in the financial services landscape brought upon us by the ups and downs of the internet.
We will come back to this in a future Bill. In that context, I would encourage the Treasury to listen to some of the things that noble Lords have said today, to be flexible and perhaps come forward with proposals that encourage these very important dynamics for the future. In the meantime, of course, I beg leave to withdraw my amendment.
Amendment 24 withdrawn.
Amendments 26 and 27 not moved.
Consideration on Report adjourned.
House adjourned at 10.21 pm.